DKRW calls it quits in email to state officials

Photo courtesy Allen Best and WyoFile Two concrete pads, poured in late 2010, are the only physical evidence of DKRW’s coal-to-liquids project — 12 miles south of Medicine Bow — ever existed.

Photo courtesy Allen Best and WyoFile
Two concrete pads, poured in late 2010, are the only physical evidence of DKRW’s coal-to-liquids project — 12 miles south of Medicine Bow — ever existed.

By David Louis

dlouis@rawlinstimes.com

RAWLINS — Without any fanfare, DKRW’s final biannual meeting came and passed without a hall being rented, an audience to address or the principal actors showing up.

That’s because in an email dated May 16, DKRW’s Managing Director Bob Kelly notified the Wyoming Industrial Siting Council (ISC) his intentions to suspend development of the Medicine Bow Industrial Gasification and Liquefaction Project because of market conditions.

The correspondence went on to note DKRW would not submit an update to a previous socioeconomic report due today or host its final biannual meeting required before March 31. Both conditions were required under its ISC permits.

Failure to meet these stipulations — specifically not updating the socioeconomic report — will result in the termination of their permit, said Kimber Wichmann, Wyoming Department of Environmental Quality, Industrial Siting Division, principal economist.

“We have to wait for Saturday to pass and we actually have to wait another three days if it’s postmarked and mailed should they decide to submit that information. We have to give them up until that deadline to comply with their permit. If they don’t we will issue a letter of termination,” Wichmann said.

This is the end

DKRW’s email signaled an inglorious end to the troubled $2 billion coal-to-liquids (CTL) project 12 miles south of Medicine Bow.

The CTL and coal-handling facilities were set to be located at the mouth of the Saddleback Hills Mine. As initially proposed, the facility would have encompassed a total of 405 acres, with another 338 acres used to house equipment during construction.

The CTL plant was designed to turn coal into 87-octane gasoline slated for sale in Denver, liquefied petroleum products such as propane and butane, carbon dioxide which would have been used for enhanced oil recovery and sulfur to be used in chemical and fertilization products.

Though the loss of its ISC permit may not preclude its resurrection some day and the pursuit of a new permit my be undertaken, noted Kelly’s email, “The current oil and gas market conditions do not merit continuing with the Industrial Siting process at this time.”

The move to force the ISC to terminate the permit has left the regulatory body scratching its head.

“We did try to contact them,” Wichmann said. “Our attorney tried to reach out to their attorney, Mary Throne, when we got the email just to see if they wanted to withdraw the permit. We just wanted to see if we could have handled this a different way or at least more expediently and now we will just have to let it run its course.”

Project opponents speak up

As a vocal opponent asking many pointed questions during past biannual meetings, Carbon County Higher Education Center Executive Director David Throgmorton is not surprised DKRW officials are making it someone else’s responsibility to kill the project.

“I think this is a company that has no integrity to start with,” Throgmorton said.

“Basically they are putting the ISC in the position of pulling the plug on it,” he said. “They don’t have the integrity of saying it’s not a viable project and we’re walking away from it.

“They mulled around and admitted it was not a viable project, but if the ISC wants to pull the permit they would put up with the circumstances, which is kind of an (expletive) way of doing things,” Throgmorton said. “If they were going to pull the plug on this they should have manned-up and pulled the plug instead of having the ISC do it.

“They don’t want to tell investors on other projects they walked away from this. They want to say the state of Wyoming walked away from them.”

Regardless of who ultimately forces DKRW from the Wyoming landscape, Carbon County Commissioner Leo Chapman is sad to see the economic benefits the CTL plant would have brought disappear into thin air.

“DKRW told me once there were (permanent) jobs at stake, not to mention the construction jobs, and what the project would mean in boosting the county’s assessed valuation as well as the taxable revenue from production,” Chapman said.

“It’s disappointing, but not surprising,” he said.

Supporters wonder what went wrong

Supporters of the project are left wondering why DKRW and their investors, with so much skin in the game already, find it easy to walk way having spent $120 million to date on environmental studies, permits and construction specs.

Still to some, the decision to abandon the project did not come out of the blue.

“We’ve known this was going to happen for some time,” said Medicine Bow Councilmember Kenda Colman.

“It’s been one of those things, but like I’ve said I was going to be a faithful DKRW supporter until the day it dies. We had to be,” she said. “Whenever industry wants to come here we have to be that diehard, ‘lets go do this’ community.”

Medicine Bow Councilmember Cynthia Chace, also a vocal DKRW supporter, is sympathetic to the Houston-based company’s plight.

“What could they do? What else could they do if they were going to lose money?” Chace asked.

“Nobody goes into business to lose money. If it wasn’t going to be profitable, what was their choice? And when you can’t show really good books, who’s going to invest? I was always for the project, but the thing I hated most was that people stopped coming to their meetings. All you had show up were environmentalists trying to kill the project.”

Rough meetings

For those who did show up to the biennial meetings, many came away feeling they need to take a shower when they got home, Throgmorton said.

“That’s not an accident. These guys learned all their best moves when they were top executives at Enron and they are still using those same moves. They haven’t changed at all. I could see why (people) wanted to take a shower. I know I did,” Throgmorton said.

Not a big fan of DKRW, Throgmorton said the other problem involves the Wyoming regulatory system itself.

“It’s a problem when they can go through the county commissioners, the ISC and all of the other regulatory bodies and nobody had the (guts) to say this project is not going to work. Nobody had the guts to step up and do that. DKRW really exemplifies some of the problems with the system,” Throgmorton said.

“If the regulatory folks had been asking the hard questions and asked them from the very beginning, we would be having this conversation five years ago. Everyone was so anxious to look like they were supporting potentially a new big business coming in that, frankly, they did not do their jobs.”

Calls to DKRW and their attorney were not returned.

DKRW Historic Hurdles

For almost 10 years, the Medicine Bow Fuel and Power facility (MBFP) has faced project delays and funding problems.

  • In 2008, DKRW applied for a Department of Energy (DOE) loan capped at $1.75 billion, pending an environmental review. The review was never finished because of fallout from the Solyndra controversy.

Solyndra was a manufacturer of cylindrical panels used in solar cells.

Declining silicon prices led to Solyndra halting all business activity, and in 2011 filing for Chapter 11 bankruptcy and defaulting on more than $500 million in federal loans.

  • n In February 2014, DKRW canceled its agreement with then-construction contractor, Sinopec Engineering Group.

At that time, DKRW executives hoped to finalize financing by the end of the year and start construction on the plant in early 2013. The funding never came through and construction never began, prompting the decision by DKRW to break ties with Sinopec.

  • n In May 2014, Arch Coal Inc., a major stockholder and lease holder on the rights to mine coal for the proposed CTL plant wrote off $57.7 million in investments on the long suffering project, but retained its equity interest if construction of the plant is ever realized.
  • n In December 2015, Arch Coal reported a net loss of $2.0 billion for the quarter ending September 30, 2015 prompting speculation the company would file for bankruptcy protection.
  • n January 2016 Following weeks of speculation on its financial solvency, St. Louis-based Arch Coal, Inc. filed Chapter 11 bankruptcy protection in attempt to reorganize its mining operations and restructure debt owed to 72 entities including 11 Arch subsidiaries.

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