Ambres new business strategy: when one boondoggle is failing, plan an even bigger boondoggle
by Kelly Mitchell
April 5, 2013
It has not been a good month to be an aspiring coal exporter in the Pacific Northwest. But fear not, export-proponent Ambre Energy has an even more absurd plan up its sleeves.
Ambre Energy is facing a five month delay on a state permit from Oregons Department of State Lands (DSL) for its Morrow Pacific Project. All three private investors, Mitsui, KEPCO, and Metro Ports, have backed out of the Coos Bay Project Mainstay export terminal. Governors Kitzhaber and Inslee wrote a letter to the White House urging the CEQ in the strongest possible terms to undertake and complete a thorough examination of the greenhouse gas and other air quality effects of continued coal leasing and export before the U.S. and its partners make irretrievable long-term investments in expanding this trade.
Energy analysts and news sources are already speculating about the outlook for the remaining four export terminals. And the outlook for Ambres Morrow Pacific Project is especially dismal. Despite the companys attempts to become the first new coal exporter through the Pacific Northwest, it has yet to receive a single state or federal permit. Ambre has now resorted to bullying state officials for the sake of calming potentially spooked investors.
Or as Ambre spokesperson Liz Fuller puts it, “If we move forward with the [Department of Environmental Quality] permit, we can show to our investors that there is a regulatory (system) in this state that moves forward.
Ms. Fuller conveniently omits the fact that Ambre was caught lying to county and state officials about the size of their proposed Millennium export terminal and initially refused to give Oregons DSL the required documents to analyze impacts at the Port of Morrow. DEQ has more than a few reasons to take a hard look at Ambres proposal.
Perhaps in light of these recent setbacks, Ambre has made a minor media splash about another new business venture a proposed coal to liquids plant in Rock Springs, Wyoming. And if you thought their export scheme was risky, you havent seen anything yet.
Coal to liquids plants convert coal (or a mix of other feed stocks) into liquid fuels such as gasoline or other petrochemicals. The technology was first invented during World War II by the Germans, when Allied forces blocked access to traditional petroleum. With some recent developments, the process can also involve intermediate steps to gasify the coal or produce synthetic natural gas.
However, there are no large-scale commercially viable coal-to-motor liquids plants in the United States. None. Not far from Rock Springs, DKRW, a Houston-based company led by ex-Enron officials, has been attempting to build the first commercial-scale coal to gasoline plant in the US – for the past eight years. Arch Coal is also one of the leading partners. This $2 billion plant, supported by $345 million in pending taxpayer-backed bonds, has faced repeated financial and regulatory setbacks and local controversy. The contracted fuel purchaser is facing federal investigations for allegedly defying trade sanctions with Iran. After eight years, Medicine Bow Fuel and Power still lacks complete financing.
Its not hard to imagine how DKRWs project turned into such a massive boondoggle. The process of converting coal is energy and water intensive, producing a fuel that has twice the climate impact and five to seven times the water use of conventional gasoline. Given the fact that three quarters of the US experienced a climate-change fueled record drought last year (a drought that is ongoing), these projects dont pass the laugh test for environmental stewardship.
And beyond the climate, health, and environmental impacts, the economics are shaky at best and present serious risks for investors. Throughout the country, coal to liquids and coal gasification plants are having trouble securing financing.New mileage standards for US vehicles and low carbon fuel standards make investments in expensive unconventional fuels questionable. Investors are becoming increasingly wary of stranded assets due to new climate regulations or legislation. And the technology to address climate pollution at a CTL facility – commercial-scale carbon capture and storage – is unproven, so there is no reasonable case study for estimating the potential costs.
If thats not enough, Ambre Energy already has a poor track record in bringing coal to liquids projects to life:
- 2005 The recently formed Ambre Energy begins a joint venture to commercialize a proprietary coal to liquids technology, with no success. As documented in Sightline Institutes report Caveat Investor:
Ambres spending spree proved fruitless. As revealed in Ambres FY 2008 annual report, a University of Utah research team, sponsored by Ambre itself, determined that the Hybrid Energy System was not the most efficient system for creating an oil substitutea discovery that helped render Ambres patent and its associated research and development investments essentially worthless The company and its subsidiaries notched a net loss of more than Aus$7.2 million in the fiscal year that ended in June 2008, while collecting less than Aus$142,000 in revenues.
- 2008 Ambre scales down the ambition of its proposed coal to liquids plant in Felton, Australia following community opposition. The company hoped to build a mining operation on fertile agricultural plant to feed the coal to liquids operation. The plant was eventually scrapped in 2013 after the Queensland Premier spoke out in no uncertain terms:
To be absolutely clear, no company, whatever it chooses to call itself, has a right to develop a mining operation in the Felton Valley, and companies will not be able to secure such a right under the Government.
- 2009 – Ambre proposes a $375 million coal plant in southeastern Montana with the goal of producing 1.6 million barrels of synthetic crude oil a year. After attempting to secure a Department of Energy loan guarantee, Ambre closed up shop and announced plans to build a coal export facility in Longview, WA.
Now, Ambre Energy and its talking heads at Gard Communications are attempting to paint the Rock Springs coal to liquid proposal as a viable investment. In reality, its another poor business venture from a company well versed in failure and financial mismanagement.
Coal demand in the US is declining, and export proposals and coal-to-liquid pipe dreams are nothing more than a desperate attempt to keep the industry afloat. Politicians and investors should keep a careful eye on this latest boondoggle.