For public consumption Mitch Daniels wears his “conservative” hat but as governor of Indiana, he over saw one of the largest intrusions of the public sector into the private sector ever, in any state.
In 2006, Daniels was the first to promote the building of a new coal-to-gas plant in one of the most polluted towns in the nation, Rockport, IN. At the time gas prices were running around $12/mmbtu and fear was gripping the nation that natural gas was nearing an end and the only salvation, climate change or not, would be to convert the hydrogen and some of the carbon in coal to a “syn” gas that could substitute for industrial fuel and residential home heating. The price tag was large at around $1.5 billion but the public saw a crisis and fear of freezing in the moderate midwest winter took hold.
The result: Daniels forced Indiana natural gas utilities to enter int contract negotiations with a Louisiana based company with connection to former Louisiana Senator Bennett Johnston to provide syngas from coal. The company, Leucadia National is doing business as Indiana Gasification LLC.
Those negotiations dragged on for nearly three years during which time large additional supplies of natural gas were found using technology that released natural gas from deep underground shale rock in several large fields in Texas, the west and New York and Pennsylvania.
Those gas finds drove the price of natural gas down severely, dropping below $2/mmbtu in late 2008 before finding some kind of equilibrium in the $4-5 range where it has stayed for most of the second half of 2009 and 2010. (The price on 9/9/10 was $3.79).
As a result, the forced negotiations with the gas utilities broke down since it was clear that the price of natural gas would remain a mere percentage of the cost of production of syngas which was placed at $7.52/mmbtu in 2007. And, that figure did not include any retirement of the massive debt that will run up to contruct the multi billion dollar facility for which sponsors are seeking federal loan guarantees to build.
After negotiations with the gas utilities failed, Daniels came up with a plan that mimicked the Communist Chinese Model of Business belying his supposed “conservative” image.
Daniels, along with a bi-partisan state legislature promoted and passed legislation that made the State of Indiana the plant’s sole customer and then would further force the state’s gas utilities into being complicit in selling the state owned syngas to their customers at a price that will be determined through further negotiations with what is called the Indiana Finance Authority (IFA).
It is clear to even the most inept mathematician that if it costs $7.52/mmbtu to produce syngas in a nearly $3 billion plant, that if they plant is to ever pay down its construction loans, that the price for their product will have to be well above $10/mmbtu and could be as high as $15 if cost overruns like have occurred in other similar facilities occurs.
Even at the more conservative figure and absent profits for the private concern, that is 264% of the price for natural gas on the spot market today.
But it goes further. The contract that Daniels’ stage agency is negotiating is for a period of thirty years and the US Department of Energy is saying that at least twenty years out, the price of natural gas will only reach an average of close to $8/mmbtu or about the same as the production cost of coal syngas in 2007 dollars.
Its informative that Daniels chooses to ignore the DOE figures when making his assessment and claims to have a better crystal ball for predicting the price of natural gas than the resources of DOE’s Energy Information Administration. When asked about it last year he claimed his figures were better than mine because he relied on the Federal government experts he chooses to ignore when it suits his purpose. (http://www.youtube.com/ecoserve#p/a/u/0/j4U6b-rGfTA)
I had to occasion to ask Daniels personally last year how he was able to reconcile his supposed “conservative” philosophy with such a socialist approach to government, a plan that forced his state government into competition with natural gas and made the state’s private sector gas utilities to go along. Paraphrasing his response, he claimed essentially that desperate times required desperate measures.
If that is the measurement of his commitment to his so called conservative fiscal policy, then his actions in Indiana show a likely propensity to make the federal government even larger and more obtrusive in our lives, a far cry from the image that he hopes to convey in his odd quest for national office.
Should Daniels secure a spot on the Republican ticket in 2012, it’s clear that he will say nearly anything to constituents to get elected and then act the opposite if he perceives a need to further enrich his friends.
Daniels is not a conservative except when it fits his purpose to appear so. Instead, he is nothing more than a panderer to the far right whose real agenda in a continued slide toward the corporatization of the the United States that will make his friends enlarge their already big corporate profits at the expense of the people he claims to serve.
JOHN BLAIR is a Pulitzer Prize winning photographer who serves as president of the environmental health advocacy group Valley Watch in Evansville, IN. He is a contributor to Red State Rebels: Tales of Grassroots Resistance from the Heartland, edited by Jeffrey St. Clair and Joshua Frank. (AK Press) His email address is firstname.lastname@example.org