Tondu looks at 'gasification'

By Bill O'Brien

October 28, 2007 10:46 am

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FILER CITY -- Joe Tondu contends he can reduce pollution and double the energy produced by his Manistee County power plant, but said he needs millions of dollars in local tax breaks and guaranteed energy contracts to do so.

Tondu heads the TES Filer City Station co-generation plant south of Manistee and is investigating an "integrated gasification combined cycle" (IGCC) process, an emerging energy technology he said would create a more efficient facility while significantly reducing environmental impact.

"We've done a lot of homework on it," Tondu said. "There's a lot of people that are looking at that technology because it has a lot of promise."

The process involves converting carbon-based fuel sources like coal or biomass material to synthetic gas. Materials are compressed at high temperatures of around 1,600 degrees Celsius, creating an inert slag material that can be used as aggregate in road gravel or concrete uses.

"Syngas" produced through the process is treated to remove other materials before it's used to fire gas turbines to make electricity.

Such a conversion could more than double the existing 60-megawatt plant's power output while cutting emission levels by 50 percent, he said.

But it's a costly technology. Tondu estimates it will take $200 to $300 million to convert the Filer City operation to an integrated gasification plant. He wants state and local governments to pledge millions of dollars in tax breaks to make it economically feasible.

"You can't do it unless the state wants it, unless the community wants it," Tondu said.

Legislation proposed

One proposal in the state Legislature would create a system under the Michigan Public Service Commission in which the state would require utility companies to secure long-term contracts with power generators to ensure those operations will have a market for newly generated power.

Another bill in Lansing would create up to three tax-free "renaissance zones" around the state for integrated coal gasification facilities. Such a designation would waive most state and local taxes for up to 15 years, with the consent of local governments.

Another would provide expansion at existing renaissance zones to redevelop obsolete facilities, a concept that could apply to the Filer City plant. Those proposals could cost Manistee County taxing units tens of thousands annually in local property tax revenue.

The bills are among a myriad of energy-related proposals being debated in Lansing against a backdrop of evolving utility de-regulation and efforts to secure long-term energy supplies for Michigan residents and businesses. A 21st Century Energy Plan released this year by the MPSC estimates Michigan's power load will grow by an average of 1.2 percent annually over the next 20 years, and it will need at least one new base load power plant within eight years to keep up with demand.

State Sen. Jason Allen, a Traverse City Republican and a co-sponsor of the contract energy bill, said the plan would ensure that Michigan businesses, particularly manufacturing companies, would have access to sufficient power supplies at consistent rates.

"The aspect of this legislation is hopefully to meld a good balance between the market and the state," Allen said. "We would call it competitive choice; it's an economic issue for our manufacturing base."

Transferring risk?

But utility companies stand in opposition, concerned it would create an unfair advantage for some power generation plants and could significantly increase consumers' costs.

"They want to transfer the risk from themselves to the utilities and their customers," said Jeff Holyfield, a spokesman for Consumers Energy.

Manistee County officials said renaissance zone proposals could have major budget consequences for local government. The existing TES Filer City plant has a state equalized valuation of more than $37 million and a yearly local tax bill exceeding $1.3 million, according to county tax records, a figure that could significantly increase if the complex is upgraded with gasification technology.

Designating a tax-free zone there could have a "huge impact" on the county's tax base and property tax revenue, county Treasurer Russell Pomeroy said. The plant is the county's top property taxpayer for 2007, he said.

"It would be a major policy decision," county administrator Tom Kaminski said. "They're one of our major taxpayers."

Existing renaissance zones in Michigan reduced local property taxes last year by around $100 million, according to state Senate estimates. Public school taxes in those zones are reimbursed by the state, but not local government revenue.

Still, some local officials said they're willing to consider giving up significant tax dollars in exchange for a cleaner power plant.

"If the IGCC system is as clean as they say it is, it could be a good thing," said Allan O'Shea, chairman of the Manistee County Board of Commissioners. "We could make some history here. We could show other power companies in the U.S. how to do it."

Filer Township Supervisor Jim Epsvik said he'd consider supporting a renaissance zone, but he has reservations about putting the existing facility in a tax-free zone.

"That's a whole different scenario," he said.

Local residents are both intrigued by and wary of Tondu's plans.

"We're kind of taking a wait-and-see attitude until more stuff shakes out," said Fred LaPoint of Manistee Citizens for Responsible Development, a local group that sparred with and ultimately prevailed over Tondu's previous plan to build a new coal-fired plant in Manistee. He agreed the new technology would improve the plant's environmental impact.

"I admit the gasification process looks pretty good," LaPoint said. "That's a huge benefit."

But he's leery about steep public assistance that Tondu said is needed to make the project viable.

"If they're making money, and lots of money, why should the public be expected to help finance this project?" LaPoint said.

Tondu said public support is critical to the project's feasibility, given the state's bleak economic times.

"Michigan's got a tough economy," Tondu said. "It makes it tough to build something like this."