MBA Top 5 Stories in 2012-Energy

Every day from now until the end of the year Missouri Business Alert will be looking back at the top five stories that shaped particular industries or regions in the state. Keep checking back to find out what 2012’s biggest news-making events were where you live and where you work.

Energy

Summer drought deters ethanol production

The drought, which caused the entire state to be declared a natural disaster area, renewed the conflict between fuel and food interests: The meat industry and several governors want less of the nation’s corn going to make ethanol, but it’s questionable whether a pullback would really help lower corn prices skyrocketing because of the worst drought in 30 years.

Some ethanol plants in the Midwest voluntarily slowed production, with corn prices continuing to climb and supplies tightening. The circumstances led to discussions on whether more of the corn crop should be shifted toward food production. Some Nebraska ethanol producers ceased production entirely.

One northwest Missouri ethanol producer fears the drought could hamper his company’s operations. Roger Hill, the general manager of Golden Triangle Energy in Craig, said he was able to avoid production cuts.

“It’s going to be tough,” Hill said when asked what the drought may do to Golden Triangle. “We don’t know how it’s all going to shake out.”

Nationally, ethanol production dropped by 20 percent since the start of the year and has reached a two-year low, according to the Renewable Fuels Association.

At the start of the year, U.S. ethanol plants were expected to produce about 13.7 billion gallons. However, the RFA said that level could decline to 12.5 billion gallons if the recent pace of manufacturing continues.

Read more:

Concerns loom over drought’s impact on ethanol industry St. Joseph News-Press, August
Would cutting out ethanol lower corn prices?, Kansas City Star, August
Meat Producers Ask EPA To Suspend Ethanol Requirements, Missouri Business Alert, August

Missouri Loses Competition For Nuclear Project 

Westinghouse Electric Co. and Ameren Missouri placed a bid for federal funds to help build a new generation of smaller and potentially safer nuclear reactors. The funding could have totaled up to $452 million and allowed Ameren to apply for licenses to build up to five 225-megawatt reactors at the company’s nuclear power plant in Callaway County.

In addition to boosting energy production at Callaway, Missouri also could have turned into a hub for manufacturing the new reactors — known as Small Modular Nuclear Reactors, or SMRs — and exporting them around the world, Gov. Jay Nixon said.

The Department of Energy passed over the bid by Ameren Missouri and Westinghouse in November. But the Energy Department softened the blow for companies that weren’t chosen for grant money by simultaneously announcing plans to make additional funding available.

The plan had backing from other Missouri electricity suppliers and the state’s university system, as well as broad bipartisan political support.

Missouri Sens. Claire McCaskill and Roy Blunt both expressed disappointment that the Ameren-Westinghouse partnership wasn’t chosen and pledged to help the companies as additional money is made available. Nixon said the “impressive coalition of public and private stakeholders will continue its work to put Missouri at the forefront of America’s energy future.”

Read more:

Federal aid sought to build nuclear reactors in Missouri, Kansas City Star, April

Ameren-Westinghouse passed over for nuclear grant St. Louis Post-Dispatch, November

Missouri loses out on sought-after nuclear project, Kansas City Star, November

Missouri Sand Companies Tap Fracking Demand

Missouri has largely missed out on the hydraulic fracturing boom that has had a huge impact on energy markets in recent years.

While the drilling is taking place in other states, Eastern Missouri companies are getting a piece of the action by supplying huge quantities of nearly pure silica sand, called frack sand. It’s a commodity in wide demand among energy producers who rely on the tiny granules to prop open the cracks in shale rock, allowing oil and natural gas to escape.

Mining of the St. Peter Sandstone in Missouri isn’t new, but recent advances in technology for more economical oil and gas producers have instigated the recent fracking boom. More than 65 million tons of sand, with an estimated value of $2 billion, have been sold over the years, according to the Missouri Department of Natural Resources.

“We’ve been fracking wells forever,” said Shari Dunn-Norman, associate professor of petroleum engineering at Missouri S&T University in Rolla. “The technology really was perfected in the ’80s or even the late 1970s.”

Read more:

Missouri sand companies tap fracking demand St. Louis Post Dispatch, November

Missouri cashes in by supplying fracking sand Press Connects, November

Missouri Sand Companies Tap Fracking Demand

Missouri has largely missed out on the hydraulic fracturing revolution that has turned energy markets upside down in recent years. The drilling boom that’s sweeping across other states, like Pennsylvania and Ohio is conspicuously absent here.

But that doesn’t mean Missouri isn’t benefitting from fracking. Eastern Missouri companies are playing a big part in the new energy boom by supplying huge quantities of nearly pure silica sand, called frack sand. It’s a commodity in wide demand among energy producers who rely on the tiny granules to prop open the cracks in shale rock, allowing oil and natural gas to escape.

Mining of the St. Peter Sandstone in Missouri isn’t new, but recent advances in technology for more economical oil and gas producers have instigated the recent fracking boom. More than 65 million tons of sand, with an estimated value of $2 billion, have been sold over the years, according to the Missouri Department of Natural Resources.

“We’ve been fracking wells forever,” said Shari Dunn-Norman, associate professor of petroleum engineering at Missouri S&T University in Rolla. “The technology really was perfected in the ’80s or even the late 1970s.”

Read more:

Missouri sand companies tap fracking demand St. Louis Post Dispatch, November

Missouri cashes in by supplying fracking sand Press Connects, November

Low Coal Prices, Regulations Threaten Missouri Coal Plants, Cause Production Company Bankruptcy Filing

St. Louis-based Patriot Coal filed for bankruptcy protection in July, an action prompted by the company’s struggles with low coal prices.

In a document filed in federal bankruptcy court in Manhattan, the company said that it had $3.6 billion in assets and $3.1 billion in debts.

Coal companies have been hit hard by a decline in demand, arising in part from competition from cheap natural gas and a weaker economy. They have also blamed tougher environmental rules for rising costs.

In an effort to move out of the negative limelight Patriot Coal Corp. agreed to become the first U.S. coal operator to phase out and eventually stop all large-scale mountaintop removal mining in central Appalachia. Mountaintop removal is a highly efficient but particularly destructive form of strip mining unique to West Virginia, Kentucky, Virginia and Tennessee. Coal companies blast apart mountain ridge tops to expose multiple coal seams.

The Springfield News-Leader wrote an editorial in June, before Patriot Coal filed for bankruptcy, defending coal companies and stating that Missouri’s economy and 81 percent of it’s energy supply depends on coal.

“We already have coal plants slated for closure at Sibley, Blue Valley, Chamois, James River, Lake Road, Meramec and Montrose. A recent study from the Missouri Public Service Commission estimated the compliance costs of the mercury rule for Ameren, Empire and KCP&L. The shocking conclusion: “the overall cost to the electric utilities and potentially their customers would be in an approximate range of $2 billion-$3.3 billion.

Read more:

War against coal will harm our economy, Springfield News-Leader, June

Patriot Coal Files for Bankruptcy Protection New York Times, July

Patriot Coal to stop mountaintop removal, Columbia Tribune, November

Kansas City Power & Light Charges More for Less Energy Use

The Missouri Public Service Commission approved a plan that allows KCP&L to slightly increase some rates to cover the start-up costs of various programs that increase energy efficiency. The utility company will be allowed to increase some customer rates to recover revenue from reduced electricity sales caused by new energy efficiency programs.

“There won’t be an impact on customer bills today and tomorrow,” said Katie McDonald, director of communications for KCP&L. “It’s not a blanket statement that if you use less, you pay more.”

The increased rates will not apply to customers who simply use less power from decreased usage or move into a smaller house. It is designed to cover the costs of utilizing specific KCP&L energy-saving programs, much like a person pays an upfront cost for an energy-efficient appliance and then gets the savings down the road.

The program is expected to roll out next year and cost $40 million over three years for rebates and other incentives to encourage efficiency and conservation. KCP&L hopes the program will result in electricity savings worth $150 million in those years.

Those KCP&L customers’ electricity rates will rise slightly to cover the program’s initial costs. After the three years, if it meets at least 70 percent of its conservation target, KCP&L would be able to raise rates further to cover revenue lost from the reduced electricity use.

The reduction in usage is expected to amount to what 11,000 homes would consume and eliminate the need for a small natural-gas-fueled power plant.

Compensating KCP&L for the first time for lost electricity sales would be a fundamental shift in how it has operated for more than a century. For utilities, the main way to increase profits has been by selling more electricity, building new power plants and adding distribution lines. Utilities routinely are allowed to charge customers to cover the cost of such infrastructure, plus a percentage so they have some profit.
KCP&L gets OK to charge for some conservation losses, Kansas City Star, November

KCP&L to charge for conservation, St. Joseph News-Press, November

KCP&L’s Chesser throws his energy into tackling the big stuff, Kansas City Stat, February

 


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