AEDC, energy group engaged in preliminary talks on $3.7 billion Pine Bluff GTL project

Arkansas Economic Development Commission chief Mike Preston and officials with Energy Security Partners LLC confirmed this week that they’ve engaged in preliminary talks concerning what would be the nation’s first full-scale gas-to-liquids project but have not been able to reach an agreement concerning possible incentives from the state to help fund the $3.7 billion processing facility.

Last month, ESP executives and Pine Bluff officials announced that Jefferson County is being considered as the top location to build and operate the large-scale industrial plant that would convert natural gas into clean-burning diesel fuel.

The project, considered by some to be the “holy grail” of the alternative energy sector, would turn cheap natural gas into premium quality petroleum products such as diesel, gasoline and jet fuel using a proprietary technology first developed by the Nazi war machine in World War II.

Preston, while attending the State Chamber of Commerce’s “Be Pro Be Proud” workforce plan announcement on Tuesday with Gov. Asa Hutchinson on Tuesday, told Talk Business & Politics that he was pleased with the progress that ESP officials had made in acquiring land for the project and negotiating with Pine Bluff economic development officials on local incentives.

According to ESP officials, the GTL facility will produce approximately 33,000 barrels per day (bbl/d) of diesel and naphtha and has an anticipated capital cost between $2 and $3 billion. If completed, the project would be the first “full-scale” GTL refinery in the U.S., meaning that it would be capable of at least 20,000 bbl/d of production.

The project calls for the creation of 225 new, permanent plant operator positions with an average wage of $40 per hour, ESP officials said. The construction period is anticipated to create or support more than 5,000 jobs within the state and would add $333 million in annual labor income statewide, according to an economic impact analysis performed by EMSI, a recognized leader in labor market data and regional economic analysis.

Jefferson County economic development officials have OK’ed qualifying incentives available for the GTL project through Jefferson County’s 3/8-cent sales tax, which voters approved in 2011 for economic development and is administered by the Economic Development Corporation of Jefferson County (EDCJC).

“They have done a great job in moving forward on the project and we will continue further discussions as it progresses,” Preston said. However, the AEDC chief did say the GTL project is not eligible for the state’s “superproject” status because the project did not meet the legislative threshold of at least 500 jobs.

ESP MAKES CASE FOR STATE INCENTIVE PACKAGE
William Carpenter, senior vice president of Energy Security Partners, said the EMSI study demonstrates that the GTL project will have a significant and measurable impact on the Pine Bluff region and Arkansas’ economy overall.

“We trust that as AEDC performs their own internal economic impact and cost/benefit analysis they will reach similar conclusions,” Carpenter said of current negotiations. “They are astute and resourceful people at AEDC who understand what it takes to keep Arkansas competitive within a global economy.

“Given the tremendous support this GTL project is receiving across Arkansas from state legislators, prospective suppliers and customers, and Arkansan citizens seeking employment opportunities, ESP is confident that the AEDC team will recognize the investments already made into the project and acknowledge the incentive offer made by Jefferson County as a strong signal that ESP is ready to fully engage with state leaders to land this GTL project for Arkansas and make Arkansas an epicenter of America’s clean-energy economy.“

Although Preston didn’t offer any details of talks with the ESP, Carpenter said his company is hopeful that state economic development officials will eventually respond with an incentive package that is worthy of a multibillion dollar project with the management team, engineering expertise, and financing strategy “to effectively leverage those incentives in a way that will create the expected upside for the State of Arkansas in terms of capital investments, new job creation, and overall economic uplift and expansion.”

“There are other industry participants who believe ESP can succeed when building and operating a GTL plant,” he said. “More specifically, we want to succeed in Arkansas and we want Arkansas to benefit as much as possible.”

Carpenter continued: “We must acknowledge that the development, engineering and construction timeline for a GTL project is vastly different than the more typical ‘major manufacturing’ projects that have historically considered Arkansas. For that reason, this GTL project may create a wonderful opportunity for the Governor’s office, Arkansas legislators, and AEDC to collaborate with ESP leadership to identify and negotiate a competitive incentives proposal that sends a powerful message to the energy ‘process industry’ sector overall that Arkansas is open for business.”

ESP NABS $5 MILLION FOR STATE HIGHWAY OFFICIALS FOR INTERSTATE ACCESS
To date, ESP said it has already spent more than $12 million in the development stage of the project. The Little Rock-based energy development group also revealed it has received an offer of $5 million in dedicated funding from the State Highway Department in support of a new or improved interchange or exit ramp from Interstate 530 to facilitate better access to and from the industrial project site in Jefferson County where the GTL plant is being proposed.

Danny Straessle, spokesman for the state Highway and Transportation Department, said the $5 million in funding is included in the four-year draft Statewide Transportation Improvement Program, or STIP. “This funding is a mixture of federal aid and state funders,” he said.

In addition, Carpenter said ESP has engaged Dutch banking and financial giant ING Bank N.V. of London to advise ESP on project development and capital raising for the GTL processing plant since early 2014, and it has made a visit to Arkansas to view the proposed 1,000-acre Jefferson County site in April 2015.

“Developing commercial-scale GTL projects in North America remains a viable natural gas monetization strategy,” said Rodolphe Olard, managing director of Global Head of Natural Resources Advisory, Structured Finance for ING Bank N.V., London branch. “Our visit to Arkansas was an opportunity to see the proposed project site, meet the economic development leaders, and understand the basis for considering Arkansas as a potential location of the project.”

Still, Carpenter did say ESP is directly engaged with one other state that historically has been very successful when attracting and retaining major process industry projects such as a GTL plant. “At this point we are not prepared to disclose any possible offers of incentives being discussed with any other state, county or municipality outside of Arkansas,” he said. “We want to keep talking about Jefferson County, and why we believe this is the best place in America for a GTL project.”