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Many Stars Coal-to-Liquids

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This article is part of the Coal Issues portal on SourceWatch, a project of CoalSwarm and the Center for Media and Democracy. See here for help on adding material to CoalSwarm.

The Many Stars Coal-to-Liquids was announced in August 2008 after the Crow Tribe (Apsáalooke Nation) announced an agreement with Australian-American Energy Co. (AAEC), a subsidiary of Australian Energy Company Limited, to build a $7 billion coal-to-liquids plant in southeastern Montana.[1] The Crow reservation is located on top of an estimated 9 billion tons of recoverable coal.[2]

Fuel produced by CTL is very polluting, emitting twice as much CO2 as regular gasoline when burned. It was proposed that the CTL plant be operational by 2016.[3]

While the primary focus of the project was initially on coal-to-liquids, a May 2010 resolution by the Crown Nation noted that the agreement between AAEC and the Crow Nation also noted that "due to the growing demand for coal in Asia, there are potential opportunities to develop both short-and long-term export markets for Crow coal, and AAEC is in the process of investigating those markets and the logistics for transporting coal to West Coast ship-loading terminals."[4]

Proposal as announced

The initial announcement about the project - which was jointly issued by Many Stars CTL and Montana Governor Brian Schweitzer -- stated that under a 50-year agreement it would "initially" convert "38,000 tons per day of coal into 50,000 barrels per day of ultra-clean diesel, jet fuel and naphtha. The project would provide up to 4,000 jobs during construction and 900 permanent jobs on the reservation after start up, which is expected in 2016."[1] It was stated that "the project design calls for capturing CO2 for geo-sequestration and supply to enhanced-oil recovery projects ... in otherwise declining regional oil fields."

The media release stated that "AAEC has already completed its initial feasibility study for the coal-to-liquid fuels project and will begin the environmental permitting process later this year. Construction is expected to begin in 2012."

In the media release announcing the project, Crow Chairman Carl Venne stated that "we made a decision to pursue this type of clean-coal project because it provides long-term economic and social benefits for our people for many generations to come. The Many Stars Project will help us become self-sufficient.” As part of the agreement it was announced that AAEC "will be assisting Little Big Horn College in creating needed training and educational programs to meet the human resource needs of the project. Additionally, discussions are underway with Montana State University and Idaho State University for education and training of the energy workforce that will be necessary for the project."[1]

For their part "the Crow Nation has committed coal and water resources for the project while AAEC will provide the development capital and project management. Both the Crow Nation, through its company Apsáalooke Energy LLC, and AAEC will participate in the board of directors of the project company." Venne also indicated that the Interior Department "has been involved in the project since talks first began last year. Members of the Crow Nation also have met with representatives of the U.S. Department of Energy regarding the project."[1]

It was proposed that coal for the project would come from a new mine to be developed by the Crow on their reservation. Tribal leaders said the plant would be built to capture 95 percent of its carbon dioxide emissions.

The announcement stated that Schweitzer "was introduced to AAEC at an international coal-to-liquids conference in New York during the summer of 2007 and invited the company to more closely assess Montana’s abundant resources."[1]

Project development

In November 2008 the joint venture company announced that it had established a new headquarters office in Crow Agency. Dick Lyon, the Global Project Director with Australian-American Energy Co. LLC, stated in a media release that "it’s important to be visible in the community and to let people in Crow Agency know we are going to be here for the long haul.”[5]

However, early the following year the project had a setback with the leader of the Crow Nation, Carl Venne, unexpectedly died of natural causes.[6] In an opinion column in the Billings Gazette Allan Blood wrote "I have been asked many times since his passing whether Carl's death changes our plans to build the Many Stars CTL project. The answer is absolutely not ... Carl was instrumental in bringing this project together, but he also made sure through our negotiations that our contract was with the Crow Nation, not with a single man. The contract was approved overwhelmingly by both the Crow legislative and executive branches."[7]

In March 2009, the Bureau of Indian Affairs (BIA) approved the contract between the Crow Tribe and Australian-American Energy Co. The project must still go through the permitting process before construction can begin.[8] The following month the joint venture partners had executed the final project agreements. The media release stated that the agreements, which totalled over 500 pages, were the "key supporting, foundational agreements that provide all the detail regarding the development and operation of the project over the next several decades, as envisioned by the founders in the original Project Agreement.[9] The agreement called for the Crow to receive up to 50 percent of profits from the plant after investors recoup their costs. Total proceeds to the tribe could eventually pass $1 billion each year.

In mid-June 2009, AAEC announced that it had contracted the mining consultancy company, John T. Boyd Company, to undertake further coal exploration work[10] and Schlumberger Carbon Services to investigate the potential for carbon storage on Crow land.[11] Blood also announced that Dick Lyon, the Global Projects Director for Australian-American Energy Company (AAEC) LLC, had also been appointed Chief Executive Officer of AAEC.[12]t

Nine days after announcing the appointment of the John T. Boyd Company, their estimate on the coal resources was in. In a June 11 report they concluded that within the Many Stars Project area there was an 'inferred coal resource' of 849 million tonnes under the US National Instrument 43-101.[13]

Near the end of 2009 AAEC announced that it had decided to use the ExxonMobil's Accelergy technology for its proposed plant.[14]

Project economics

In a presentation in January 2009, AAEC stated that the $7.4 billion dollar capital cost for the project would be spread over 6 to 7 years. The company estimated that it would cost "$100 million for initial engineering, permitting and development cost", $400 million for new mine development and $7 billion ($140,000/barrel of daily capacity) for the CTL plant".[15]

In testimony before the Senate Finance Committee, the former Chief Counsel Crow Nation, Donald Laverdure, referred the coal deposits under Crow land as "currently stranded coal assets". He stated that "government support and incentives are needed to fully realize the economic viability of such a significant project. Incentives help mitigate the extremely high capital cost and project execution risk associated with this type of mega-project, even during a currently robust commodity market, due to historical uncertainties with such commodity markets."[16]

Canadian company acquiring plant's Australian sponsor

In July 2009, Vancouver-based Terra Nova Minerals Inc. announced that it was acquiring "all of the share capital of Australian Energy Company Limited, which owns 90.91% of Australian-American Energy Company LLC" as well as the "remaining 9.09%" of AAEC to give the company 100% of AAEC Australian-American Energy Company, the sponsor of the Many Stars plant. The announce of the proposed reverse take over stated that it was planned that the new entity be called Great Western Energy Inc. It was proposed that Terra Nova CEO Willie McLucas would be Great Western's president, and Australian Energy chairman Allan Blood would retain his position.[13][17]

However, the reverse takeover was subject to approval of AEC's 144 shareholders. The announcement of the proposed deal stated that Allan Blood, the Chairman of AEC, had agreed to accept the offer "on behalf of associated entities in relation to 15.6% of the ordinary shares in AEC" and Mr. Evan Edwards, the Finance Director of AEC, had agreed to accept the offer "on behalf of associated entities, in relation to 2.6% of the ordinary shares in AEC". The announcement stated that the bid was "conditional on at least 75% of the AEC ordinary shares being tendered."[13]

A further element of the deal was that Willie McLucas, Tom Allen and Grant Sawiak would remain as directors of the Company with Allan Blood, Evan Edwards, Dick Lyon and Brian Zarker appointed as new directors. It was also proposed that executive officers of the Company would be Allan Blood as Chairman, Willie McLucas as President, Dick Lyon as Executive Director and CEO, and Grant Sawiak as Secretary.[13]

At the time of the proposed merger, it was estimated that the combined company would have had only $C1.76 million in working capital, as of the end of August 2009.[18]As part of the deal, the company proposed "to complete a private placement of up to $12,000,000 before expenses" which would be "used principally to delineate an updated resource calculation for the Many Stars coal project."[13] After allowing for a $C1.2 million fee for the capital raising, Terra Nova stated that the company would have $C12.56 "working capital available to fund ongoing operations will be sufficient to meet its obligations, as currently contemplated, for a minimum of 18 months."[18]

Of the $C12.56 working capital, Terra Nova sketched that it anticipated a little over $C4 would be spent on further coal exploration work, $C2.5m on administration and overheads, $1.833m on Promissory Note Repayment, $1.5m on "Crow Tribe Expenses", $1.05m on "Technology Selection /Pre-FEED", $965,000 on Carbon Dioxide Sequestration planning, $380,000 on land selection and acquisition and a further $200,000 on environmental permitting for the CTL plant.[19]

Prior to a vote by shareholders on the deal, Terra Nova wrote to shareholders explaining that an AECL share would be worth 0.26 of a Consolidated share in the new company. A Consolidated share had an ascribed value of $1.[20]

Lawsuits

In May 2011 the Crow Nation sought to terminate the agreement with AAEC on the grounds that the company had not met the minimum expenditure commitments. In response, and AAEC court filing stated:[21]

“The collapse of the global equity markets, the unanticipated development in the United States of vast resources of shale gas and regulatory uncertainty regarding support of coal to liquid projects have materially and adversely affected the economic feasibility of the project,” Australian-American Energy declared in a Wednesday court filing."

Associated Press reported that "the company also said conditions needed to support its continued investment, including the tribe’s execution of a water rights lease, have not been met, and that the tribe had no grounds to send a termination notice."[21]

Contact details

Project Details

Sponsor: Australian-American Energy / Great Western Energy
Location: Big Horn County, MT
Size: 8,000 barrels/day synfuels (revised downward from 50,000 barrels/day)
Type: Coal-to-liquids
Projected in service: 2016
Status: Early development

Citizen Groups

References

  1. 1.0 1.1 1.2 1.3 1.4 "Crow Nation and Australian-American Energy Company Sign Agreement for Montana Energy Project", Media Release, August 8, 2008.
  2. "Crow Tribe strikes deal for $7B coal project," Associated Press, August 8, 2008.
  3. "Stopping the Coal Rush," Sierra Club, accessed November 3, 2009.
  4. "Joint Action Resolution No JAR10-08", Special Session of Crow Tribal Legislature, May 28, 2010.
  5. "Many Stars CTL Office Opens at Crow Agency", Media Release, November 17, 2008.
  6. "Statement from Allan Blood, Chairman of Australian-American Energy Company on the passing of Crow Chairman Carl Venne", Media Release, February 15, 2009.
  7. T. Allan Blood, "Guest Opinion: Crow leader’s vision will live on in Many Stars coal-to-fuels project", Billings Gazette, March 6, 2009.
  8. "BIA Approves Many Stars CTL Agreement," Media Release, March 12, 2009.
  9. "Final Project Agreements Executed", Media Release, April 15, 2009.
  10. "Many Stars Contracts with John T. Boyd for Coal Exploration Work", Media Release, June 2, 2009.
  11. "Schlumberger Carbon Services Proposes CO2 Sequestration Program", Media Release, June 5, 2009.
  12. "Australian-American Energy Appoints Dick Lyon as CEO", Media Release, June 8, 2009.
  13. 13.0 13.1 13.2 13.3 13.4 "Terra Nova Minerals Inc. Announces the Proposed Acquisition of", Bloomberg, July 22, 2009.
  14. "Accelergy Direct Coal Liquefaction Technology Selected", Media Release, December 14, 2009.
  15. Many Stars CTL Project & Australian-American Energy Company, "Presentation to Australian - American Chamber of Commerce Energy Conference, Houston, Texas", January 29, 2009, page 7.
  16. Donald Laverdure, former Chief Counsel Crow Nation, Testimony before the Senate Finance Committee, July 21, 2008.
  17. "Canadian company acquiring coal-to-liquids company," Associated Press, July 29, 2009.
  18. 18.0 18.1 "Notice of Meeting and Management Information Circular for a special meeting of shareholders of Terra Nova Minerals Inc. to be held October 14, 2009", Terra Nova Minerals, September 14, 2009, page 9. (Numbering from the document pagination not the pdf numbering).
  19. "Notice of Meeting and Management Information Circular for a special meeting of shareholders of Terra Nova Minerals Inc. to be held October 14, 2009", Terra Nova Minerals, September 14, 2009, page 10.
  20. William McLucas, Terra Nova CEO, "Notice of Meeting and Management Information Circular for a special meeting of shareholders of Terra Nova Minerals Inc. to be held October 14, 2009", Terra Nova Minerals, September 14, 2009, page 2.

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