McClendon speaks out against OG&E's proposed plant
Chesapeake CEO speaks out against proposed power plant at Oklahoma Corporation Commission meeting
By Heidi Rambo Centrella - 7/30/2007
Chesapeake Energy Corp.’s Aubrey McClendon criticized the construction of a proposed coal plant today before the Oklahoma Corporation Commission.
“I’m here in a somewhat uncomfortable position,” McClendon told commissioners. “I find myself being in disagreement with some very good friends of mine, that would be OG&E and PSO and these are two corporations that Chesapeake does business with every day.”
The two companies are part of a group seeking to construct an initially-priced $1.8 billion coal plant to provide electricity for OG&E, Public Service Company of Oklahoma and the Oklahoma Municipal Power Authority.
McClendon said his reasons for opposing the facility are five-fold.
“We don’t believe the plant is needed right now in Oklahoma,” McClendon said, citing unused power by existing plants.
The second reason, he said, is the technology the plant proposes to use is not what they intended to use in the beginning.
“Our view that they had to move from a more conventional technology to this technology was because they knew they needed a cleaner plant. We believe this would only reduce emissions by about 10 percent,” he said, adding the technology is only used in Japan and Denmark, where he said the plants run at much less efficiency than “a normal coal plant.”
“We don’t understand why Oklahoma, our rate-payers and citizens should be the guinea pigs for this proposed plant with its new technology.”
His third reason for opposing the plant is that it is too expensive, as it already has increased in cost from $1.4 billion to $1.9 billion as the technology changed.
“We’re certain that by the time this plant works to move forward, the cost will go up more. There is not a billion-dollar energy infrastructure project in the last year anywhere in the world that has come in on budget.”
Rather, he said he could see it costing upward of $3 billion.
His fourth reason for believing coal is the wrong answer is he sees no reason why Oklahoma, which is the second-largest per capita gas producer in the country should be “importing train loads of dirty coal from Wyoming every day and at the same time exporting clean-burning natural gas to other states.”
“We believe it is a major contributor to air pollution in Oklahoma, water pollution in Oklahoma, public health issues in Oklahoma, and we believe it’s the wrong solution to Oklahoma’s growing energy needs,” he said.
“It’s just against the interest of Oklahoma. If you look around today, virtually everything that’s going on in our state, at the end of the day has some relationship to the natural gas industry that is robust and profitable and it’s leading this state forward. It’s the foundation of our current prosperity, and I think will be the foundation of our future prosperity if we’re willing to take advantage of it.”
One way to resolve the threat of higher natural gas prices, McClendon said, is companies can purchase it today in 10-, 15- or 20-year terms.
“You can hedge away your gas price risk right now,” he said.
Paul Renfrow, vice president for OG&E Corp., agreed it’s awkward to be on opposite sides of the issue.
He did say the company has no fuel preference whatsoever.
“We have jobs,” he said. “And our job is to forecast what Oklahoma’s electricity needs are going to be. We can’t wait until the day we have a blackout to take action.”
In their research, Renfrow said they found by the year 2011-2012, a new baseload generation would be required. Baseload is power that runs 24/7.
“As the economy grows, that baseload demand grows,” he said, adding that natural gas and coal were the only viable options, however they both have pros and cons.
“Natural gas is without a doubt the cleaner-burning fuel…but it comes with price fluctuation and high prices,” he said. “Coal is a very stable fuel, but what comes with coal is environmental baggage.”
Renfrow said currently OG&E is about 60 percent natural gas, so “we have no bias.”
“Natural gas works great, but you cannot put all of your eggs in one basket,” he said. “So we’ve done all the modeling and the analysis and brought it to the Corporation Commission for something that’s new in this state. It’s called pre-approval.
“Chesapeake, for some odd reason went to the Supreme Court trying to block
our ability to have this pre-approval. We don’t understand that.
“So there’s how we got to where we are today,” Renfrow continued. “We have no fuel preference. Coal is significantly cheaper than natural gas, and Aubrey (McClendon) was right - it’s about price and it’s about portfolio. Those are the two key reasons we’re interested in a coal plant.”
When asked if his opposition was based on competition, McClendon replied, “Life is about competition. We compete everyday.”
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OKCBusiness, Copyright © 2007, All Rights Reserved.
Originally Posted by SWOKC 4 me
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