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Opportunity for Growth

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Dakota Gasification Company is an international leader in technologies that successfully capture and transport carbon dioxide (CO2) emissions from a coal gasification process. In eight short years, we are profitably marketing captured CO2 emissions while rapidly improving our operational processes across the board.

Potential for more CO2 in the pipeline

(Map) The Williston Basin is a structural-sedimentary
intracratonic basin located on the western shelf of
the Paleozoic North American craton. The
present-day basin occupies a large segment of
the northern Great Plains and extends northward
into Canada, potentially an area for more carbon
dioxide sequestration.

Today, Dakota Gas plays an increasingly important role to Basin Electric.

Because of increased natural gas prices, more net income has been generated in the last three years at Dakota Gas than for the entire prior history of the plant.

$5-a-dekatherm Plan

While there is a temptation during high natural gas price conditions to view Dakota Gas as a cash cow, the company goal is to create a sustainable operation with a mission to keep synthetic natural gas production costs at no more than $5 a dekatherm.

The rationale behind the $5 per dekatherm goal is that at some level between $5 to $6 per dekatherm, new gas plays won't be developed, but Dakota Gas will be able to continue to operate profitably. For example, when gas companies have spent the money to drill a well for gas, they'll produce it at any price because the cost is sunk. In the past a well would produce for about 10 years, so once the wells were drilled, gas companies weren't very responsive to price because operating them wasn't very expensive.

Today, new gas developments quit producing in about 18 months, so gas companies drill a new well every 18 months. The producer is much more responsive to price, so if it costs $6 a dekatherm to drill a well and the market price is at $5 a dekatherm, they shut down their operations.

Gas usage in the USA

30% = electricity
34% = industry
13% = commercial purposes
20% = residential heating/cooking

Beginning in 2006, Dakota Gas employees took the challenge to bring a 21st century business management culture to the Great Plains Synfuels Plant to ensure a sustainable future in the volatile business environment in which they were operating.

Dakota Gas employees have embraced the $5 a dekatherm goal and plan to achieve it by working smarter and improving the revenue stream. The goal is to find $50 million of either savings or added revenue a year.

Cost savings potential

The Synfuels Plant embarked on a process with various consultants to externally benchmark all its activities to see how it compares to others in the industry on such areas as reliability, safety, environmental protection, work efficiency, business systems and security.

Dakota Gas has determined through this benchmarking process that there is a potential to capture $30 million in savings per year through maintenance, operation and energy efficiencies, and by improving production reliability.

There is also potential to add $60 million in revenue from products by fully employing the ammonia plant, capturing carbon dioxide market value, selling fuel streams now burned in the boilers, and capturing the new cresylic acid and phenol markets. Supply in the marketplace of phenol and cresylic acid is decreasing, making the product more valuable.

At year end and two years into what was set up as a 10-year plan, Dakota Gas has already captured $20 million of the $50 million per year needed to reach the $5 a dekatherm target. Dakota Gas management believes it can continue to provide great value to Basin Electric if it can achieve the $5 a dekatherm goal, and continue to meet or exceed all safety and environmental requirements, and maintain a stable operation mechanically.

The future of carbon markets is still in play, but Dakota Gasification Company and its CO2 capture, storage and transport technologies are ready for the challenge.

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Self-reliance and best practices

"Through benchmarking our operations against industry standards, we learned that we have a self-reliant approach to much of what we do. Instead, we could be employing industry management plans to address some issues at the plant. Our management philosophy has evolved to include an awareness that learning from industry best practices is better than self-learning and making mistakes. Our people are smart and we can figure out solutions, but why waste time if the solution already exists?"

– Gary G. Loop, chief operating officer and senior vice president of Dakota Gasification Company.

Reasonable legislation needed

"We believe we can protect the climate and maintain a strong economy, but it will require a balanced approach in which consumers continue to conserve, the industry continues to invest in and apply new technologies, and the government introduces the kind of legislation that will allow for more rapid advancements while avoiding crippling and economically devastation time lines."

– Ronald R. Harper, CEO/General Manager, Basin Electric Power Cooperative, March 2009

More CO2 capture from coal

"New, environmentally friendly technologies, like the CO2 capture technology Basin is applying at Antelope Valley, will help to secure the future of abundant, domestic energy for North Dakota and the nation. As with the Dakota Gasification plant, Basin Electric is leading the way forward with carbon capture and sequestration technology at the Antelope Valley plant, and the State of North Dakota is working with them to make it happen."

– John Hoeven, Governor of North Dakota, July 2008