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Little time to fight unfair ‘Leucadia tax’

State on hook for company’s risky coal-gasification scheme

All risk, no reward. That’s the only way you can describe what Hoosier ratepayers and families across our state currently face from the proposed coal gasification plant and financing scheme in southern Indiana unless our elected leaders act to protect us from this bad deal before the end of the month.

A few years ago, Leucadia Corp. – an out-of-state Wall Street stock and hedge fund – decided that it wanted to construct a coal gasification plant in Rockport. Unlike the massive coal-fired power plant that currently operates in Rockport, coal gasification is a virtually untested technology that converts coal into a synthetic natural gas. Essentially, it takes one dirty and expensive fossil fuel and converts it into a dirty and even more expensive fuel.

Realizing the plan carried sizable risks for it in addition to potential profits, Leucadia devised a scheme to lock Hoosier ratepayers into a long-term contract so that the investment firm would make money even if the project failed or went over budget. With declining natural gas prices, the cost of making synthetic gas is nearly twice the current price of natural gas, and unless lawmakers act before the legislature adjourns, Hoosiers will be forced to pay a new tax for the next 30 years.

In 2010, Leucadia entered into an agreement with the Indiana Finance Authority that would force Hoosier ratepayers to buy Leucadia’s synthetic gas for 30 years, even if it costs more than natural gas. This will act like an excise tax forced upon Hoosier families and businesses and will show up on the gas bills that all of us will have to pay.

According to a recent Indiana University study, Hoosier families will have to pay $375 over the first eight years of the project, while Indiana small businesses will be taxed as much as $2,000. The coal gasification project and this “Leucadia tax” will cost the state’s gross domestic product up to $1.4 billion and, assuming residential and commercial consumers bear the burden of coal gasification losses, could cost Indiana up to 1,800 jobs a year from 2017 through 2025, according to the study.

Simply put, Hoosiers are being sold a raw deal. Leucadia’s coal gasification project would lock Hoosier families across the state into a future of higher bills and less money in their pockets. Doubling down on coal in Rockport would also add further toxic pollution in a place where pollution from its existing coal-fired power plant contributes to 140 deaths, 210 heart attacks and 2,300 asthma attacks each year, according to the Clean Air Task Force.

At a time when families are struggling to make ends meet, we cannot afford to take on all of the risk and pay the costs for Wall Street’s risky bet.

Senate Bill 510 originally promised to protect ratepayers from this new Leucadia tax and from footing the costs of this bad business deal. We worked with a coalition of consumer, ratepayer, senior citizen and environmental groups to support this bill. Unfortunately, the bill’s strong ratepayer protections were gutted by legislators with ties to companies that would benefit from the plant. This is an outrage.

Indiana legislators need to put Hoosier families over their corporate interests. Lawmakers need to hear from all of us that Hoosier homeowners and small businesses should not have to pay an additional tax to cover Leucadia’s losses for 30 years – a timeframe many ratepayers may not live to see.

We will work with our allies to ensure that ratepayers have a real guarantee that their monthly gas bills will not be used to subsidize a risky Wall Street venture on untested, uncompetitive coal gasification technology.

The threats to all Indiana families posed by this coal gasification project extend beyond just dollars and cents.

They reach into the lives and livelihoods of Hoosiers and small businesses across our entire state. The time for action is now.

With just days left to act before the April 29 deadline, the General Assembly must take action now to protect Indiana families from this new Leucadia tax, higher gas bills, lost jobs and a risky business venture that should stand or fall on its own. Please call and write your legislator to protect gas ratepayers from the costly “Leucadia tax.”

Steve Francis is the chairperson of the Hoosier Chapter of the Sierra Club. He wrote this for Indiana newspapers.