Company, Utilities Resume Talks Over Synthetic Gas

ALAN SAYRE

BATON ROUGE, La. (AP) ¿ A company planning to produce synthetic natural gas said Wednesday that it has resumed talks with so-far-reluctant Louisiana utilities about buying its product as a hedge against often-volatile natural gas prices.

Lake Charles Cogeneration plans to create synthetic gas with petroleum coke, a plentiful byproduct of refining.

The project, backed by $1 billion in Gulf Opportunity Zone bonds provided through the federal government as a hurricane recovery measure, was put together before natural gas prices plummeted last year.

So far, major power and gas suppliers in Louisiana ¿ including Entergy Corp., Cleco Corp., Atmos Energy Corp. and CenterpointEnergy Inc. ¿ have not been willing to buy synthetic gas, citing the company's desire for long-term contracts, questions about transportation and storage and whether consumers would benefit.

The Public Service Commission is monitoring the progress, but has refused to intervene.

On Wednesday, LCC attorney Luke Piontek told the commission that the company had been talking again with Entergy and was designing a revised business plan that it would present to the commission staff if LCC's investors approve. The company's principals include Hunter Johnson, a Washington, D.C.-based development partner and son of former U.S. Sen. J. Bennett Johnston, who has lobbied on behalf of the company.

Piontek said that besides synthetic gas, LCC will be manufacturing industrial gases and is in negotiations with potential major buyers for that output. He also said company-hired economic consultants were projecting that natural gas prices ¿ currently trading around $4.25 per thousand cubic feet ¿ would be in the $7 to $8 range by the time the plant opens in 2013.

"If you can trust these experts, we will be slightly below that," Piontek said.

Utility representatives said earlier that they did not want to get locked into long-term contracts that could force them to buy synthetic natural gas at prices higher than regular gas prices ¿ a cost that is passed on directly to customers' bills.

Piontek also said the company was willing to give $40 million a year to the PSC that could be used for such things as reducing power bills. In addition, Piontek said the plan under development would allow the PSC to force down LCC's price if it was above natural gas prices.

No utility company representatives spoke.

Copyright 2009 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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