General Electric, University of Wyoming suspend plans to build US$100M joint clean coal research facility near Cheyenne, Wyoming, citing uncertain national energy policy, cheap natural gas, low electricity demand

CHEYENNE, Wyoming , August 1, 2011 () – General Electric and the University of Wyoming announced Friday they have suspended plans to build a $100 million joint clean coal research facility near Cheyenne amid uncertainty in the nation's energy policy, lower natural gas prices and tepid demand for electricity.

Construction of the High Plains Gasification-Advanced Technology Center was expected to begin this year and finish in late 2012. The plant would have been a test site for turning coal into gas, which burns more cleanly than coal.

The project had reached the bidding phase. The university and GE were reviewing proposals from the two firms competing to build the plant when GE decided to suspend the project, said Bill Gern, the university's vice president for research and economic development.

"GE called us," Gern said. "We were in the process of really starting to say we were ready to select the design builder."

Gov. Matt Mead called the decision disappointing but not surprising, saying the U.S. and Wyoming are strangled in energy development by lack of a national energy policy.

"This is a real world example of the local impact of the federal government's failure to provide a policy path forward for energy use in America," he said in a statement.

More coal is mined from Wyoming than any other state by far. The Powder River Basin in northeast Wyoming and southeast Montana is the richest coal source in the U.S. and home to several enormous surface coal mines.

The vast energy supply has helped to keep Wyoming's economy relatively strong through the recent recession. Coal, oil and natural gas also have enabled Wyoming to remain one of the few states with a balanced budget and no state income tax.

Wyoming has invested millions in clean coal research amid concern that efforts to control climate change could sooner or later hurt the energy industry through tighter regulation of carbon dioxide emissions, which cause global warming.

Powder River Basin coal has low sulfur and pollutes less than other coals but also is wetter than coal mined elsewhere, making it difficult to turn into gas. The Cheyenne plant would have been tasked with overcoming that challenge.

The state's only university and GE were to split the project's cost.

"Basically what we're seeing in the market is natural gas prices are decreasing from the growing shale reserves, a lower power demand based on the recession - the recent recession of the last two years - and then no clear energy regulatory policy," GE spokeswoman Yokima Davison said, referring to gas drilling plays in Texas, the Rockies and back east.

Important GE customers have meanwhile cancelled a large sum of coal-fired power projects in the U.S.

"So there just isn't a conducive market for cleaner coal projects to move forward," Davison said. "It's a really hard decision. We really value our partnership with the university and the state of Wyoming."

The University of Wyoming has spent between $2 million and $2.5 million on the project and will pay GE another $6 million to $7 million for work done to date, Gern said.

Sen. John Barrasso, R-Wyo., said he remained bullish about Wyoming coal despite the project's suspension.

"The future of coal in Wyoming is bright," he said through a spokeswoman. "I am confident that others will continue to move forward with new clean coal technology."

GE remains committed to being a leader in cleaner coal technologies, said Keith White, the general manager of GE Energy's gasification business.

"We will reassess the environment in 18 to 24 months," he said in a statement.

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