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DOE taps untouched multibillion-dollar loan program for fossil fuel projects

The U.S. Department of Energy offered a conditional commitment to guarantee loans of up to $2 billion to construct the world's first methanol production facility to use carbon capture technology.

The commitment was awarded to Lake Charles Methanol LLC for the construction of a plant in Lake Charles, La. The company plans to sell the captured carbon to Denbury Onshore LLC for enhanced oil recovery, or EOR, in the Gulf Coast region of Texas. According to a release from the Department of Energy, the facility would be the first petroleum-coke-to-methanol facility in the U.S.

The project will be the first loan guarantee made under the Advanced Fossil Energy Project solicitation issued by the Departments Loan Programs Office. The agency has offered the program since 2006, but documents obtained in a Freedom of Information Act request showed that interest in the program was limited and many applicants withdrew applications over low natural gas prices.

"We have about $8.5 billion of authorization for this advanced fossil solicitation," U.S. Secretary of Energy Ernest Moniz said on a call with reporters Dec. 21. "I do want to emphasize that we'll have over $6 billion of remaining authorities for fossil projects."

Outside of fossil fuels projects, the Loan Programs Office runs a $30 billion portfolio of loans, loan guarantees, and commitments supporting 30 projects. Those projects include massive wind farms, large solar generation and thermal energy storage systems, and retooled auto manufacturing plants.

"This conditional commitment represents a major milestone in the Department's efforts to scale up carbon capture utilization and sequestration and continue American leadership in advanced fossil energy technologies," Moniz said in a news release. "The Department's Loan Programs Office has received more than 70 applications to its current solicitations for almost $50 billion in loans and loan guarantees, which can allow projects to leverage additional private dollars for major infrastructure projects that will create thousands of good-paying American jobs and generate cleaner energy in the future."

On the call, Moniz said meeting global climate goals will be difficult without advancing carbon capture technologies.

"This is a big step forward," Moniz said. "A big step forward for the economic development it represents, for moving a large-scale carbon capture project forward and it's a big deal, frankly in terms of broadening the portfolio of what I certainly feel has been an extraordinarily successful loan program overall in moving new technologies forward and in some cases literally creating new areas of economic activity."

The plant will produce methanol, a chemical widely used in industrial processes, hydrogen and other chemical and gas projects. The project is expected to sequester 4.2 million metric tons of carbon dioxide annually and reduced carbon dioxide emissions by 36% compared to other methanol production facilities.

The project is expected to require a $3.8 billion infrastructure investment. The project will also create roughly 300 jobs in Texas for EOR activities, 200 permanent jobs in Louisiana and an expected 1,000 construction jobs.

"Reaching Conditional Commitment with the DOE over the terms of a loan from the Federal Financing Bank of the U.S. Treasury under the loan guarantee program is an important milestone that represents the commitment of the federal government to promote innovative, clean fossil energy technologies and to support the financial close of this project," said Lake Charles President and CEO Don Maley in a company news release. "We hope to reach financial close in 2017 after completing our equity raise and project development."