June 25, 2009 / 8:28 PM / 10 years ago

UPDATE 2-AEP, Southern pull out of FutureGen project

(Recasts, updates with FutureGen, Southern and AEP comments)

NEW YORK, June 25 (Reuters) - American Electric Power Co Inc (AEP.N) and Southern Co (SO.N) said on Thursday they were withdrawing from the U.S.-government backed FuturGen project to capture and store greenhouse gas emissions from a coal-fired power plant.

AEP and Southern, the nation’s two biggest emitters of carbon dioxide (CO2), plan to focus on their own carbon capture and sequestration (CCS) projects.

Their withdrawals come just weeks after Energy Secretary Steven Chu breathed new life into FutueGen by agreeing to fund the federal government’s part of the project in Illinois.

The Department of Energy (DOE) anticipated spending $1.073 billion, $1 billion of which comes from Recovery Act funds for CCS research. The alliance’s contribution was $400 million to $600 million, based on a goal of 20 members each contributing $20 million to $30 million over a four to six year period.

The U.S. government wants to cut greenhouse gas emissions like CO2 that scientists have linked to the warming of the planet. CCS could allow coal, which currently provides about half the nation’s electricity, to remain an important source of power for decades.

A spokesman for FutureGen, Lawrence Pacheco, said the departure of AEP and Southern will not affect the project.

“We still have a core group of members. We are still seeking new members ... and are in discussions ... on a cost sharing plan,” Pacheco said.

FutureGen members include Anglo American (AAL.L), BHP Billiton (BHP.AX)BLT.L, China Huaneng Group, Consol Energy (CNX.N), E.ON AG’s (EONGn.DE) US unit, Foundation Coal Holdings Inc FCL.N, Peabody Energy Corp (BTU.N) and Rio Tinto (RIO.AX)(RIO.L).

Pacheco said AEP and Southern were not the first to leave. Luminant and PPL Corp (PPL.N) pulled out after the the Bush administration withdrew support for the project last year.

AEP & SOUTHERN CCS PROJECTS

“AEP and Southern were both told that to continue participation in FutureGen, each company would have to fund the project by $5 million for the next four to six years,” AEP spokesman Pat Hemlepp told Reuters.

“That’s up to $30 million we think we can spend better elsewhere,” said Hemlepp. “We have so many other climate change programs we can spend the money on that would have gone to FutureGen, like the Mountaineer plant in West Virginia.”

Results from the Mountaineer project will be much more immediate and the timeline for progress at FutureGen was not firm, which also gave AEP pause, said Hemlepp.

Mountaineer is a major coal-fired power plant with the capacity to generate 1,300 MW of electricity. AEP plans to split the stream of emissions from about 20 MW of the coal plant and store emissions that would have otherwise gone into the atmosphere to an aquifer 8,000 feet below ground.

AEP plans to put the CCS project at Mountaineer in operation this September. If it works as well as AEP hopes, the company is hoping for funds from the DOE to help expand CCS at Mountaineer to between 250 MW and 300 MW to go into operation in 2011 or 2012.

Hemlepp said AEP’s plans for a CCS plant in Oklahoma fell through when the company AEP was working with went bankrupt.

Southern, meanwhile, will concentrate on its planned 582 MW coal-fueled integrated gasification combined cycle (IGCC) power plant under development in Kemper County, Mississippi, a CCS project at its Plant Barry in Alabama, and the DOE’s National Carbon Capture Center in Wilsonville, Alabama, which Southern will operate, Southern spokesman Steve Higginbottom said.

Pending regulatory approval, Southern hopes to start building the Mississippi IGCC in 2010, Higginbottom said. (Reporting by Bernie Woodall and Scott DiSavino; Editing by Marguerita Choy)

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