Dakota Gas pays final $7.1MM to DOE

5 February 2010 - Dakota Gasification Company (Dakota Gas) has made a $7.1-million payment to the U.S. Department of Energy (DOE). This is the last payment to be made under terms of a revenue-sharing agreement signed between Dakota Gas and DOE in 1988. The payment was made Jan. 22 based on 2009 revenues.

The revenue-sharing agreement was signed when Dakota Gas bought the Great Plains Synfuels Plant -- a coal gasification plant located near Beulah, N.D. As part of the sale agreement, Dakota Gas agreed to share revenue from gas sales with the DOE through 2009.

“Including the money we returned to DOE through the revenue sharing, the purchase price of the plant, the tax credits we surrendered and the revenue received during ownership, the government has recouped $1.3 billion of its original investment in the plant,” Loop said. “We honored our commitment for revenue sharing while operating a world-class facility that’s not only critical to our operation, but also has far-reaching impacts for our nation. This plant is also helping us to understand carbon sequestration by being a part of the largest carbon sequestration project in the world. As we deal with this carbon issue, what we’ve learned at the Synfuels Plant will provide valuable information for our industry, our nation and our world as we address this carbon issue.”

The amount of revenue that has been shared annually is based on a formula that takes into account natural gas prices and other economic indicators. The arrangement was made to help DOE recover funds lent to the original developers of the plant who defaulted on guaranteed loans in 1985 after it was built.

The payment is the ninth payment under the terms of the revenue-sharing agreement. The total amount paid to DOE – as part of the revenue-sharing agreements – now grows to $388.8 million since the sale of the plant to Basin Electric, according to Ron Harper, Basin Electric CEO and general manager.

During the 1980s and 1990s, gas prices were quite low. As a result, minimal payments were made to DOE based on the revenue-sharing formula. However, beginning in 2001 natural gas prices started trending upward -- reaching more than $10/dekatherm at times – contributing to multi-million dollar revenue-sharing payments being made on an annual basis.

When Basin Electric purchased the plant, it committed not only to share revenue with DOE, but also to not take advantage of production tax credits for producing synthetic fuels that were available at the time. The tax credits expired in 2002 with a value of about $754 million. “By not using the credits to reduce income taxes, the government could offset the losses from the loan guarantee,” Harper said.

Harper said close to $400 million has been invested in the plant since 1988 to achieve environmental compliance, improve efficiency, and invest in new byproduct development. “We’ve been able to increase production at the plant by more than 25 percent of original design,” he said. “The efficiency improvements benefit DOE and Dakota Gas because the revenue-sharing formula is based in part on the amount of natural gas produced by the plant.”


In the early 1980s, DOE guaranteed a $1.5 billion-loan to the original developers of the Synfuels Plant. The developers defaulted on that loan in 1985, and the DOE took control of the plant. DOE operated the plant from 1985-1988, during which time the decision was made to offer the plant for sale through a bidding process. The parent company of Dakota Gas, Basin Electric Power Cooperative, Bismarck, was selected by DOE in 1988 as the successful bidder for the facility. Dakota Gas was formed by Basin Electric to own and operate the gasification plant.

In 2000, the gasification plant began capturing carbon dioxide (CO2) and piping it to an oilfield in Canada for enhanced oil recovery. In 2006, a second oilfield was added, increasing CO2 production capacity up to about 160 million cubic feet per day. This is one of the largest CO2 capture and sequestration projects in the world. Dakota Gas is also a member of the Plains CO2 Reduction Partnership – one of seven Regional Carbon Sequestration Partnerships established by DOE.

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