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Saturday, Jul 21 2012 10:00 PM

County: Hydrogen Energy plant may require review as chemical plant

BY JOHN COX Californian staff writer jcox@bakersfield.com

County officials are raising concerns that could create new hurdles for the $4 billion Hydrogen Energy California plant proposed near Tupman.

Kern County Planning Director Lorelei Oviatt recently told HECA's lead permitting agency, the state Energy Commission, that the hybrid power plant proposal "has the characteristics of a chemical manufacturing plant," which she stated is prohibited by the site's agricultural zoning.

While local and state officials await clarification from the project's developer, commission staff said Thursday they aren't yet convinced of Oviatt's conclusions. Even so, they said any finding that the project does amount to a chemical plant would complicate HECA's regulatory review but not doom the proposal.

A more profound issue may come into play, however. Chemical production is considered key to HECA's revised economics, and limiting its manufacturing plans -- were that to happen -- could affect the entire project's viability.

At issue in recent communications among the three parties is what chemicals the 453-acre plant would produce and what industries would use them. Chemicals used in agriculture, such as fertilizers, are allowed under the site's existing zoning.

HECA's promotional materials refer only to plans to make fertilizer, electricity for sale to the state power grid, and carbon dioxide for use in nearby oil production.

But Oviatt stated in a July 12 letter to the commission that chemicals listed in HECA's application package -- specifically, urea, urea ammonium nitrate and anhydrous ammonia -- suggest the plant would produce products "beyond the scope of the production of fertilizer for agricultural uses." She wrote that the application makes it appear the project will make products for transportation and industrial applications.

If this is the case, she added, the county will require that the developer apply for an amendment to the county's General Plan and a zone change, which tends to require rigorous scrutiny.

Oviatt could not be reached for comment last week.

No definite plans

HECA spokeswoman Tiffany Rau noted that the plant would make products commonly used in Kern farming. But, quoting from the project's permit application, she added: "These products do have other uses, and HECA will work with the County if it will sell its products for non-agricultural uses."

Specifically, the plant would be capable of producing a urea solution that mitigates nitrogen oxide emissions from diesel engines, which Rau suggested would help California's transportation sector.

She wrote in an email that HECA will work with the county to clarify and resolve any issues or concerns, "including any future intentions to sell products for non-agriculture uses."

Energy Commission staff, speaking in regard to the permitting process, downplayed the county's concerns relating to the plant's chemical manufacturing aspects.

Commission project manager Bob Worl said the county's comparison of the project to a chemical plant "may be in part a mischaracterization" because the manufacturing component is only part of the larger proposal.

While he and another staff member welcomed the county's expertise in reviewing chemical plants, and said they will work closely with the county throughout the review, they said Oviatt's letter mainly serves to alert the agency to something it would have addressed anyway.

The letter "raises questions that need to be asked and analyzed in the process of going through this," Worl said.

"It's certainly additional work and additional topics to which staff must attend in their discovery and analysis. But our process is pretty straightforward, pretty thorough."

Worl added that HECA has not yet provided a full list of products that would be manufactured at the plant. He said the commission expects to receive such a list during the review process.

Financial imperative

The idea that the plant would manufacture chemicals distinguishes it from the previous owners' plans.

Before selling the project last year to Massachusetts-based SCS Energy LLC, co-owners BP, the international oil giant, and mining company Rio Tinto sought only to have the plant generate electricity for the grid and sell byproduct carbon dioxide for nearby oil production.

SCS Energy has said making fertilizer is crucial to turning a profit at the plant, which the company says would employ 2,000 workers during construction and create 140 permanent jobs.

Nearby residents and environmental groups have recently ramped up opposition to the proposal, saying its emissions would pollute air in the area.

Despite SCS Energy's plans to bury up to 2.5 million tons of carbon dioxide a year in the nearby Elk Hills oil field, opponents argue that the plant should not be allowed to run on coal and petroleum coke as proposed.

"Too many people in the valley are already dying from the dangerously poor air quality," Andrea Issod, staff attorney for the Sierra Club, stated in a news release opposing the HECA proposal.

If it wins commission approval, SCS Energy hopes to begin operation of the plant in 2017. After that, it has said, it plans to sell the plant to another operator.

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