The Fossil Fuels Plant That Pits Trump's Base Against Itself
(Bloomberg) -- For a landmark fossil-fuel program deep in Trump country, it’s not environmentalists who are the biggest threat. It may be Donald Trump himself.
The $3.8 billion project in Lake Charles, Louisiana, would take waste from oil refining and turn it into synthetic natural gas while capturing emissions. Those products would be turned into high-value chemicals like methanol and hydrogen. Carbon dioxide, the greenhouse gas blamed for global warming, would be injected into the Earth to stimulate oil production.
For the promoters, the project could spur 1,000 jobs, use General Electric Co.-licensed equipment and showcase cutting-edge machinery to help decarbonize oil. The catch: the technology isn’t broadly proven, so banks won’t yet finance it. That means there are few sources of project debt. The most obvious lender would be a U.S. Energy Department program that some Republicans are intent on neutering.
The debate about whether the government should lend a hand in Lake Charles could divide Republicans as TransCanada Corp.’s Keystone XL pipeline did for President Barack Obama’s administration. It pits supporting companies, Republicans in Congress and Breitbart News Network LLC against the Tea Party and the Heritage Foundation, which oppose corporate handouts.
“This will be their Keystone: Do you support job creation, or ideology?’’ said Brendan Bell, the former director of strategic initiatives at the Energy Department’s loan programs office. “There’s going to be a reckoning here.’’
In the waning days of Obama’s presidency, the department’s loan programs office conditionally approved a loan guarantee of up to $2 billion for Lake Charles Methanol LLC, a Houston-based developer that uses gasification technology to refine petroleum coke into chemicals.
Department funding for the Louisiana project could enable the developer to bring in more backers -- and encourage banks to support similar projects. A Republican senator from Louisiana is backing Lake Charles.
“There is some advantage to have the Department of Energy’s support,’’ Bill Cassidy, who maintains an office in Lake Charles in the marshy area at the state’s southwest corner, said in an interview earlier this year. New technology “often needs initial support before the bond market comes in.’’
The energy department program already has designated $8.5 billion for loan guarantees for advanced-fuel projects, and Lake Charles Methanol could be the first to benefit. That funding is at risk in Trump’s 2018 budget proposal, which targets reductions for energy department programs. There are some congressional efforts that would effectively grandfather the project.
Republicans have been critical of the loan programs office for years, highlighted by its most prominent failure to date -- the $535 million loan guarantee for Solyndra LLC, a California solar manufacturer that went bankrupt in 2011. Yet, money for Lake Charles would create the sort of jobs Trump has promised to support.
“It’s an ideological debate dividing the Republican Party,” said Josh Freed, vice president at Washington-based liberal think tank Third Way.
The loan office dates to the George W. Bush administration. Its part bank and part venture capital investor, offering loan guarantees where financing from commercial banks is unavailable. Despite the failure of Solyndra, the office’s track record of successes would be the envy of Wall Street.
Still, opponents object to the idea of the government being involved.
“It’s corporate welfare,” said Nicolas Loris, an energy fellow at The Heritage Foundation, the Washington-based conservative think tank. “Maybe it’s something Trump supports, but it’s not something we support.”
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