DKRW meets minimum requirement

Editor’s note: This is the first of two stories on the sixth-month DKRW meeting required by the Industrial Siting Council. While this article is focused on the content presented, next week’s article will focus on public comment.

Nearly 40 people attended the public meeting held by DKRW in Hanna Thursday night. Many of them walked away with less answers than they were hoping for.

Bill Gathmann, DKRW’s senior vice president of finance, filled in for Bob Kelley, executive chairman of DKRW, who has been the spokesperson for DKRW over the last eight years.

Gathamann said DKRW has been focused on two efforts over the last six months.

One is to secure a new construction contractor. Currently, DKRW is in negotiations with four international construction contractors for the Medicine Bow Fuel and Power LLC (MBFP) coal-to-gasification plant near Elk Mountain. DKRW is the parent company of (MBFP)

Earlier this year, DKRW released Sinopec as the construction contractor because they were not meeting timelines.

Gathmann said the four contractors have shown a lot of interest in the project and have presented proposals in the last month to six weeks.

He added DKRW is also working on the engineering side of things. “Obviously, this is a very complicated construction,” Gathmann said.

Over the past six months, DKRW has continued to work on the financing of the MBFP project. “The Department of Energy (DOE) is working with us on a loan guarantee,” Gathmann said. “We had a big meeting with them about six weeks ago.”

Thirty individuals from different groups within the DOE attended the meeting and representatives from DKRW spent four hours with the DOE going through a detailed review of the project, Gathmann said.

“We really are at the beginning of the due diligence period,” Gathmann said.

DKRW is also meeting with commercial bank co-lenders in the financing effort.

“That is generally what we have been doing over the last six months,” Gathmann said.

Going forward, Gathmann said, DKRW is seeing a 12 to 24-month construction contract together and getting it finalized.

In the next six months, DKRW plans to settle on a single contractor. “That is going to be the big exercise, continuing the bidding process with them,” Gathmann said.

DKRW also plans to continue to working with DOE on the loan guarantee.

Going into the second half of 2015, DKRW will begin working on the construction contract with the chosen contractor.

The contract is a detailed 150-page document that has a lot of scheduling behind it, Gathmann said.

At the same time, DKRW will work on the final engineering design. “That usually goes parallel with the construction negotiation contract,” Gathmann said. As DKRW completes the engineering design, the schedule will begin to form. “The construction contracts can have 25 to 50 different exhibits.”

Gathmann estimated it would be 2016 before the construction contract is finalized. DOE will need to know the terms that come out of the construction contract.

Until the construction price and construction schedule is known, the loan guarantee from the DOE will not go to committee, Gathmann said. That could take 12 to 18 months, and Gathmann believes it will be mid-to-late 2016 when “everything gets signed up and construction can start.”

Construction at the site will most likely not start until the spring of 2017, Gathmann said.

Carbon County Commissioner Leo Chapman asked if the construction contract companies that have shown interest were from the Pacific Rim. Gathmann said that he was not able to disclose that information at this time.

Dave Throgmorton asked if the current price of oil would have an effect on the viability of the plant. Oil prices have been dropping steadily over the last several weeks and Thursday were at $60 per barrel.

Gathmann said DKRW more concerned about long-term oil prices and a viability assessment will be made when financing of the project is closer to finalization.

While oil prices are not as low as they were in 2008 during the 2007/2008 Global Financial Crisis, oil prices are expected to drop more during 2015, according to an analysis by Goldman Sachs in Business Insider.

Cindy Wallace, executive director of the Carbon County Economic Development Corporation, asked about the status of the DOE loan guarantee and how the process works.

Gathmann explained that in 2009 when DOE solicited companies to apply for the DOE $8 billion loan guarantee program using innovative coal technology. Initially four corporations applied for the loan guarantee. Currently, DKRW is the only company that is still active and the $8 billion still remains unused.

Wallace talked about coal-to-liquefaction projects in Cheyenne and Gillette. “If there are all these other projects out there, how is that going to affect you? And, if they are getting financing, why is it taking so long for (DKRW) to get financing?”

Gathmann said he was not familiar enough with the projects to comment, but went on to say the technology that DKRW is using is a much cleaner and more efficient technology.

Mary Throne, the attorney who has worked with DKRW throughout the permitting process, said as far as she knows, these companies have not started the permitting process.

“The DKRW project is still further down the road than any I am familiar with because (DKRW) has all of its permits,” Throne said.

Kenda Colman, a council woman in Medicine Bow, stated she is a supporter of the project and still is. “Thirty months is right around the corner … there are things that need to be done here and they can’t be done on a whim and a prayer,” Colman said. “All these people are in here for one reason and one reason only, they want to know if you are still coming, and I believe that you are.”

Gathmann said DKRW plans to continue the project and are still investing in the project. “All I can tell you today is we are here, we are working on it and getting bids from contractors.”

Throne reminded the audience if DKRW does not meet the requirements of the Industrial Siting Council, the permit goes away and DKRW would have to start the process all over again. In December of 2013, the Industrial Citing Council issued a 39-month extension.