Delayed Michigan Gas-Fired Plant Close to Construction Start

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In October 2016, Indeck Energy announced a plan to build a $1 billion electric generating plant (powered by natural gas) in Niles, Michigan, not far from Chicago (see $1B Electric Plant Planned Near Chicago, M-U Connection?). In February 2018, Indeck said construction would begin in summer 2018 (see Indeck to Start Building $1B Gas-Powered Electric Plant in Michigan). Never happened.

However, recent action by Niles City Council gives new momentum to the delayed project and means construction likely will begin THIS summer–in July or August. Really.

Although there has been no mention of Marcellus/Utica gas feeding the plant, we have little doubt that our gas will be used to power the plant. A number of pipelines already do, or soon will, serve that region with our gas.

The State of Michigan gave its blessing and approval for the project over two years ago, in January 2017 (see Indeck Gets Michigan Approval for $1B Gas-Powered Electric Plant).

Niles City Council has just agreed to sell extra acreage to Indeck for the project, and “OK’d two other agreements” that make the project likely to move forward.

Here’s the latest:

A $1.1 billion natural gas power plant first proposed nearly 20 years ago edged closer to reality Monday night.

The Niles City Council agreed to proceed with the sale of extra acreage to the developer, Indeck Energy Services, based near Chicago, and OK’d two other agreements that position the project to move forward.

Several council members and Mayor Nick Shelton said they were happy to see the project finally advancing, and with the prospect of creating more tax revenue and jobs in the city.

Ground could be broken in late July or early August, City Administrator Ric Huff said, and construction is expected to take three years. The plant might be operational in 2021.

Council member Dan VandenHeede cast the only dissenting votes and was the only council member to voice opposition. VandenHeede has been consistently skeptical over many years that Indeck will produce much benefit to the city in terms of taxes or jobs. He also fears plant noise and pollution, and that the company may someday abandon the site and leave it on the city’s hands.

Council action Monday should bring nearly $470,000 to city coffers with the sale of an additional 166 acres to Indeck in the industrial park. The land is intended for transmission lines from the power plant.

Once built, the plant is expected to generate $150,000 to $250,000 per year in tax revenue for the first 13 years, before annual tax revenue advances to between $1.2 million and $1.5 million, Huff said.

The deal also should generate $1 million into a brownfield redevelopment fund.

The project is expected to create 500 temporary construction jobs and 21 permanent high-paying jobs, the company has said.

Indeck made an initial proposal to build a power plant in the city in 2000 but shelved plans when rising natural gas prices made the project financially unviable.

At the time, it was one of several natural gas plants proposed but not built in southwest Michigan and northern Indiana. Since then, though, the St. Joseph Energy Center natural gas power plant was built near New Carlisle and began operating last year.

Indeck revived its natural gas power plant project in the past few years, saying the timing was right with industry moves toward cleaner energy and fewer coal-fired facilities. In early 2017 the company obtained a state air quality permit for the project, which was recently renewed. But anticipated project start dates were delayed because of financing.

Now, according to city officials, the company’s financing should be secured no later than April.

The proposed plant would generate 1,000 megawatts of electricity annually, enough to power 635,000 homes and businesses, according to the company.

Indeck paid the city $2.3 million in 2001 for 110 acres in the industrial park as the site for the proposed power plant.

The two agreements the council also approved Monday include a Consent to Assignment, which would allow lenders to step in and continue operation or construction of the plant with all previous approvals obtained by Indeck should the company fail to do so; and a $1 million Irrevocable Letter of Credit, which is similar to a surety bond payable to the city, and sought in case the city would have to decommission the plant.

“I hope if they actually do follow through and build the plant this time, they are a good neighbor,” VandenHeede said.

Council member John DiCostanzo said he felt “confident” that in the long run, the city would look back and know it made the “right decisions” concerning Indeck.*

*South Bend (IN) Tribune (Mar 26, 2019) – Indeck natural gas power plant in Niles could break ground this summer

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