A FEASIBILITY STUDY OF

COAL-BASED INDUSTRIAL DEVELOPMENT IN DOUGLAS, WYOMING AND THE SURROUNDING AREA

FOR THE CITY OF DOUGLAS, WYOMING

MARCH 23, 2004

By The Project Consulting Team

for The Spearman Company

1191 Granite Springs Rd., No, 15 Cheyenne, WY 82007

Phone/Fax (307)635-6575 mspearman@spearmanco.com

2

TABLE OF CONTENTS

Page EXECUTIVE SUMMARY 4

I. INTRODUCTION 5 II. ACKNOWLEDGEMENTS 5 III. ANALYSIS APPROACH AND KEY ASSUMPTIONS 6 IV. FACTORS AFFECTING SUITABILITY AND COMPATIBILITY 8

Converse County Site Conditions 8 Climate 8 Seismic and Natural Events 8 General Inputs for Coal-based Value Added Industry 9

Utility Costs and Communications 9 Labor, Wage, Social and Economic Considerations 9 Table 1. Labor Force in Converse and Natrona Counties 10 Table 2. Mean and Entry Level Wages for Casper 11 Table 3. Population and Demographics for

Converse and Natrona County, 2003 12 Table 4. Housing for Converse and Natrona

Counties 14 State and Local Tax Structure 16 Table 5. Converse County – Property Taxes 16 Table 6. Selected Wyoming Workers

Compensation Rates for 2004 17 Table 7. Wyoming Unemployment Standard Tax

Rates for 2004 17 Land Status 18 Community Planning Assessments 18 Coal Capacity and Reserves 18

Table 8. Current Coal Production and Remaining Capacity 19

Table 9. Average Open Market Sales Price of Coal by State and Coal Rank, 2002 20

V. NATURAL RESOURCE CONSIDERATIONS 20 Fish and Wildlife Issues 20

Map 1. Elk Range 22 Map 2. Bighorn Sheep Range 23

3

Map 3. Antelope Range 25 Map 4. Mule Deer Range 26 Map 5. White-tailed Deer Range 27

Endangered Species Issues 28 Map 6. Preble’s Meadow Jumping Mouse 29 Map 7. Canada Lynx 30 Map 8. Boreal Toad 30 Map 9. Ute Ladies-tresses 31 Map 10. Bald Eagle 31 Map 11. Black-tailed Prairie Dog 32

Vegetation Issues 32 Air Quality 33

Water Quantity and Water Quality 35 VI. CULTURAL AND HISTORICAL RESOURCE

CONSIDERATIONS 37 Map 12. Viewshed Buffer 38

VII. SOCIAL AND ECONOMIC IMPACT 39 Construction and Operation Employment 39

Table 10. Estimated Project Employment 39 Table 11. Estimated Local and Non–Local Project

Employees 40 Population Increase Due to the Project 41

Table 12. Total Population Increase Projections 41 School Enrollment Increase 41

Table 13. Total School Enrollment Increase 42 Housing Demand 42 Table 14. Total Housing Demand Increase 42

Table 15. Summary of Population and Housing Assumptions 43

VIII. PERMITTING ISSUES AND REQUIREMENTS 43 IX. CARBON SEQUESTRATION CONSIDERATIONS 45

Map 13. Carbon Sequestration 46 X. PRODUCT MARKETABILITY 48 XI. TRANSPORTATION CONSIDERATIONS 52

Highways and Roads 52 Rail 53 Transmission 53 Pipeline 54 Map 14. Transportation 55

XII. RESEARCH AND ACADEMIC CONSIDERATIONS 56 XIII. FINDINGS AND CONCLUSIONS 56

SOURCES AND REFERENCES 59

4

EXECUTIVE SUMMARY The timing of this feasibility study is fortuitous. The world’s changing attitude on its reliance of fossil fuels to run its economies coincides with the City of Douglas’ proactive efforts to assess its ability to become an energy and coal-based value added industrial center. New uses of processing by-products, once thought to be waste that could be vented into the atmosphere, will increase the demand for Wyoming low sulfur coal and gas. Other issues that impact Wyoming fossil and renewable natural resources are the national energy shortages of gasoline and electricity that will spur increased production and an aging fuels processing “fleet” that will need to be replaced. Solutions to these issues will lie in new development of processing facilities and new uses of traditional fuels. Douglas, Converse County, and the surrounding area are uniquely qualified to become a part of the solution. The siting amenities that collectively have contributed to this uniqueness include proximity to coal, the potential to significantly increase transportation and transmission, and the ability to satisfy all of the permitting and National Environmental Policy Act requirements. Other amenities, perhaps less recognized but certainly as important as the ability to obtain permits, are a ready and able skilled workforce, adequate community infrastructure, and a desire of the Community and its leaders to pursue this project. Our analysis indicates that Douglas and the surrounding area meets and in most cases exceeds the base line environmental, economic, and social requirements to be competitive for the siting of a coal-based industrial development. This Feasibility Study outlines the capacity that Douglas and Converse County have to meet or exceed expected requirements for development of a coal-based value added facility.

5

I. INTRODUCTION In response to the City of Douglas Request for Proposals (RFP) published on October 29 and November 5, 2003, The Spearman Company was the successful bidder to conduct a feasibility study for coal-based industrial development in Douglas, Wyoming and the surrounding area. The targeted areas of study include hydrogen-fueled power generation and coal gasification leading to production of pure hydrogen with carbon dioxide as a by-product. This feasibility study identifies and assesses the capacity of Douglas and the Converse County area to satisfy or meet critical requirements for coal-based value added development and the area’s viability as a storage facility for carbon sequestration.

Douglas (pop.5,288), located in Converse County, is well-known for its listing as one of the 100 best small towns in America from The 100 Best Small Towns by Norman Crampton (Petersons, 1996). Douglas is also known for being the home of the Wyoming State Fair beginning in 1905, scenic North Platte River and Laramie Peak vistas and recreational areas, and its historic place in the founding of the west. Douglas was established on the ruts of the Oregon, California and Mormon Trails. It is estimated that upwards to 500,000 pioneers traveled through the North Platte River corridor between Douglas and Glenrock. The establishment of Fort Fetterman, 11 miles from where Douglas currently sits, as well as being on the routes of the Pony Express and Bozeman Trails has established Douglas and Converse County as one of Wyoming’s and the west’s more historic places. Douglas and the Converse County area economies are based on ranching and energy with its peak of population growth and energy development occurring in the 1980’s from the oil and uranium booms.

In recent years, local leaders have invested their efforts in the targeted areas of technology, manufacturing and energy to encourage new and existing business growth. In the area of energy, the effort is focused on strengthening the coal mining industry through coal-based value added production, generation, and/or processing. This feasibility study explores the ability of Douglas and its surrounding area to sustain such a facility or facilities.

II. ACKNOWLEDGEMENTS Margaret Spearman, Principal in The Spearman Company, assembled a Consulting Team to assist with the proposed project with expertise in siting issues including land acquisition, environmental considerations, economic analysis review, and literature review. Art Reese of ART REESE CONSULTING served as the associate consultant and assisted in all phases of the study. Dr. David “Tex” Taylor, Professor/Community Development Specialist in the College of Agriculture at the University of Wyoming, served as the economics advisor to the team. Julie Kozlowski, former Assistant Director of the Office of Federal Land Policy for the State of Wyoming, performed key research and augmented data collected by Dr. Taylor.

6

Special acknowledgements and thanks go to Nancy Lee, Assistant Research Scientist at the Wyoming Geographic Information Science Center with the University of Wyoming, who digitized GIS data on several siting parameters and prepared the final report format for printing; Wyoming State Geologist Lance Cooke and Wyoming Geological Survey staff members Joe Huss, Bob Lyman and Nick Jones who provided the necessary GIS data for the data layers; Kirk Nordyke, Wyoming Game and Fish Department, who provided current GIS data on seasonal ranges and migration corridors for all big game species inhabiting Converse County; Dr. Gary Beauvais, Director of The Wyoming Natural Diversity Data Base at the University of Wyoming, who provided mapping information on the known occurrence of endangered species for Converse County; Patrick Tyrell, Wyoming State Engineer, and Mike Besson, Director of the Wyoming Water Development Commission, who provided information on water quantity and water quality; Wyoming Department of Environmental Quality staff members Dan Olsen, Darla Potter, Bernie Daley, and Ken Rairigh who provided information on air quality; Shawn Taylor, Policy Advisor in the Governor’s Office, for his update on energy development; Wyoming Market Research Center Manager Michael Lambert for his Center’s research into selected markets; and, Dr. Dag Nummedahl, Director of the Institute for Energy Research, who was most helpful in providing information on carbon sequestration and upcoming demonstration efforts. Additional acknowledgements extend to Ed Werner, Erin Alspach, and Joe Coyne with the Converse Area New Development Organization (CANDO) who did some necessary preliminary research narrowing the scope of a feasibility study from a broad perspective allowing this feasibility study to focus on the most likely projects that can be supported and sustained by the community based on the coal mining industry in the area. III. ANALYSIS APPROACH AND KEY ASSUMPTIONS The Consultant Team primarily utilized existing literature, existing data collections, interviews with state and industry leaders, and known market projections to generate data applicable to the scope of the project to generate the feasibility study within ten weeks. The targeted areas included hydrogen-fueled power generation and coal gasification leading to production of pure hydrogen with carbon dioxide as a by-product. Potential sites for carbon dioxide sequestration were studied as a separate component; however, the analysis is limited to known regional efforts to store carbon dioxide (CO2) for enhanced oil recovery to provide realistic parameters for storage needs and potential availability of such sites within the Douglas area. Because substantial research to prove the effectiveness, safety, and permanence of CO2 sequestration has commenced only recently and is part of the proposed FutureGen project (the US Department of Energy proposes to spend $320M over five years for this type of

7

research), an analysis of CO2 sequestration within the scope of this feasibility study was not attempted. Although site selection criteria have not yet been developed, there are several basic criteria inherent in siting a 275 megawatt coal gasification project or other coal value added facility of similar magnitude.

• Land Availability. A large tract of land for a plant facility will be needed. Although there is no information available on size requirements, Douglas is located in a large county with a low population that has many sites that should qualify. Geographic Information System (GIS) technology was used in mapping potential locations for siting, including existing generation facilities in the area.

• Transmission Capability. This includes an overview of both pipeline capacity

and power line availability and capacity. GIS data is utilized to provide and document existing facilities and capacity, and right-of-ways for optimum facility siting.

• Transportation Capability. Sufficient rail capacity from the source of the coal

to the facility is a requisite factor. Potential increased load and the rail industry’s ability to accommodate any required load increase was evaluated.

• Water. In absence of established water requirements and criteria for a specific

facility it is difficult to be specific regarding water availability. The following are the major water sources in the area: The North Platte River and its tributaries, including existing surface water rights which can be converted to industrial uses and still comply with the North Platter River Basin Decree, and water in the deep Madison Formation. Water availability research indicates that these are the sources of water generally considered when the development of large facilities is considered in the area.

• Proximity to Coal. Proximity to coal is a critical component in lowering cost

per btu produced. Data on amounts available and future schedules of coal lease auctions along with current production projections were analyzed relative to the potential product capacity in excess of current use that could be dedicated to the project.

• Community Infrastructure. Douglas invested in its infrastructure in the early

1970’s to address a projected population increase of approximately 15,000. An overview of available and potential housing, as well as recent medical care enhancements, have been analyzed.

• Emissions. The US Department of Energy’s vision for coal gasification is to

create the world’s most energy-efficient power plant, which would be nearly

8

emission-free. Existing literature and environmental protection standards was reviewed to determine if this portion is applicable to the study.

• Economic Feasibility/Impact/Market. Current projections for fossil fuel

energy consumption and potential for hydrogen-based fuel substitution were analyzed specifically on those uses, concentrated areas of users, and potential advantage/disadvantage in those findings as it relates to the Douglas area as a site location. The economic impact to the Douglas area is based on siting of a 275 megawatt coal gasification plant.

• Carbon sequestration. While further research is needed to determine

feasibility of carbon dioxide (CO2) sequestration sites and their temporal and spatial capabilities, Converse County’s location relative to depleted oil and gas fields, coal seams and other geological formations was analyzed. Data on the status of current research, market potential, projected timelines and the potential viability of Converse County and surrounding area oil fields as storage facilities is included in the review. A brief review of the potential for a coal-based hydrogen producing facility or ammonia producing facility as a direct supplier of CO2 by capturing its production of CO2 and selling it to an enhanced oil recovery project is included in the report.

• Hydrogen-fueled power generation. Data on the critical inputs required,

potential emission permitting standards required, and air/water discharge permits, market uses/projections and other components as outlined under the coal gasification portion of the consultant’s proposal was researched and analyzed.

IV. FACTORS AFFECTING SUITABILITY AND COMPATIBILITY Converse County Site Conditions

Climate The climate is semi-arid with an average annual temperature of 60 degrees Fahrenheit. Average annual rainfall is 7.16 inches while average snowfall is 50.9 inches with an average growing season of 150 days. Elevation ranges from 3,600 to 5,200 feet with the average being 4,815 feet. Seismic and Natural Events The Federal Emergency Management Agency and the United States Geological Survey have classified Wyoming as having a very high seismic hazard. While magnitude 6.25 and 6.5 quakes can occur within the project area, the project area is not within the portion of Wyoming included in the high risk Intermountain Seismic Belt.

9

Flooding is rare and normally associated with intense weather conditions such as local storms or rapid snowmelt.

Other events that can occur which should be considered in locating a facility include landslides, windblown deposits, aquifer collapse and ground subsidence, gas migration, seepage and venting, and spontaneous combustion of coals. Of course, while any one of these would be a serious event, the opportunities exist on a higher level in the Powder River Basin area due to the high water discharge, methane movement and considerable coal mining activity.

General Inputs for Coal-based Value Added Industry

Utility and Communications Considerations Pacific Power supplies electricity, while Kinder Morgan supplies natural gas to Douglas and Glenrock. Due to recent variability in prices and the potential opportunities for negotiated rates, current electric and natural gas prices were not included as a part of this study. Telecommunication is provided by US Qwest, including fiber optic capacity. There is also competition in the area from other long distance carriers. Both Douglas and Glenrock have broadband internet service. There is a local television station – Wyoming’s K2 in Casper. Cable television services are also available. Also, overnight and postal services are available in the area. Labor, Wage, Social and Economic Considerations

Labor With Douglas located only 50 miles and Glenrock located only 24 miles from Casper there are significant labor flows between Converse and Natrona Counties. In 2000, over seven percent of the individuals working in Converse County lived in Natrona County (U.S. Bureau of Census). Similarly, more than 14 percent of workers residing in Converse County worked in Natrona County (U.S. Bureau of Census). These commuting patterns expand the labor pool available to businesses located in Converse County due its proximity to the Casper MSA. As shown in Table 1, the total labor force for the two counties in the third quarter of 2003 was nearly 43,000. The unemployment rate for the two-county area stood at 4.1 percent in the third quarter of 2003 or about 1,700 workers. All the major occupation groups are represented in the labor force (Table 1). Included in the labor force were 1,808 Construction, Repair, and Mining workers, 3,634 Precision Craft and Repair workers, and 5,571 Professional Specialty workers,

10

which are primary employment areas in the building and operation of a value added facility. Also, all the major types of businesses are represented among the areas 5,100+ business establishments (Table 1). Included in this total were 363 construction businesses, 194 mining companies, and 211 transportation and communication businesses.

Table 1. Labor Force in Converse and Natrona Counties

Converse Natrona AreaCounty County Total

Labor Force (2003 - 3Q) 6,420 36,273 42,693 Employment (2003 - 3Q) 6,182 34,767 40,949 Unemployment (2003 -3Q) 238 1,506 1,744 Unemployment Rate (2003 - 3Q) 3.7% 4.2% 4.1%

Employees by Occupation (2003) Administrative Support Workers 676 6,571 7,247 Construction Repair and Mining 201 1,607 1,808 Executive Managers and Administrators 417 3,837 4,254 Farming Forestry and Fishing 122 1,137 1,259 Handlers Helpers and Laborers 122 968 1,090 Machine Operators Assemblers and Inspectors 75 700 775 Other Services Field Based 43 299 342 Other Services Site Based 792 5,732 6,524 Precision Craft and Repair 405 3,229 3,634 Private Household Service 0 1 1 Professional Specialty Occupations 621 4,950 5,571 Protective Services 66 447 513 Sales Professionals 73 1,002 1,075 Sales Workers and Clerks 332 3,897 4,229 Technical Sales and Administrative 13 17 30 Technologies and Technicians 110 943 1,053 Transportation and Materials Moving Workers 129 1,240 1,369

Business Count: Total Establishments 650 4,499 5,149

Types of Establishments (2003) Agricultural, Forestry, Fishing 18 81 99 Construction 35 328 363 Finance, Insurance, and Real Estate 49 370 419 Manufacturing 13 158 171 Mining 26 168 194 Public Administration 61 159 220 Retail Trade 141 782 923 Services 233 1,537 1,770 Transportation and Communication 25 186 211 Unclassified 62 162 224 Wholesale Trade 22 291 313

Source: Wyoming Department of Employment and Wyoming Business Council

11

Wage Levels

The mean wage level for the Casper MSA area in 2001 was $13.97 per hour with the mean entry-level wage at $6.95 per hour (Table 2). Mean wage levels ranged from $6.97 per hour for Food Preparation to $26.87 per hour for Management Occupations. Entry-level wages ranged from $6.04 per hour for Building & Grounds Cleaning & Maintenance Occupations to $13.40 per hour for Management Occupations. For Construction & Extraction Occupations, the mean wage was $14.98 per hour and the entry-level wage was $9.96 per hour. It was assumed that the wage levels for the Casper MSA are representative of wage rates in the two-county area.

Table 2. Mean and Entry Level Wages for Casper MSA, 2001

Mean EntryWage Level

Total All Occupations $13.97 $6.95

Management Occupations $26.87 $13.40 Business & Financial Operation Occupations $24.97 $12.68 Computer & Mathematical Occupations $19.22 $10.55 Architecture & Engineering Occupations $22.55 $13.27 Life, Physical, and Social Science Occupations $21.38 $12.40 Community and Social Service Occupations $13.85 $8.87 Legal Occupations $23.78 $12.35 Arts, Design, Entertainment, Sports, and Media Occupations $10.96 $6.57 Healthcare Practitioners and Technical Occupations $21.40 $11.34 Healthcare Support Occupations $9.12 $7.23 Food Preparation & Serving Related Occupations $6.97 $6.05 Building & Grounds Cleaning & Maintenance Occupations $8.27 $6.04 Personal Care & Service Occupations $8.59 $6.06 Sales & Related Operations $10.78 $6.06 Office & Administrative Support Operations $11.07 $7.36 Construction & Extraction Occupations $14.98 $9.96 Installation, Maintenance, and Repair Occupations $14.43 $8.36 Production Occupations $13.00 $7.89 Transportation & Material Moving Workers $13.15 $6.86

Source: Wyoming Department of Employment, Wyoming Wage Study: 2001

Population

The total population of the two-county area was estimated to be more than 80,000 in 2003, with total households of nearly 32,800 (Table 3). More than 60 percent of the population was between the ages of 18 and 65, with about one third between the ages of 18 and 44. The median age for Converse County was 38.3 while the median age for

12

Natrona County was 36.9. The median household income for Converse County was $42,417. The median household income for Natrona County was $39,394. Slightly more than 11 percent of the population of both counties was below the poverty level. Nearly 90 percent of the adult population for the two counties had at least a high school education. Nearly 30 percent of the adult population had a college or associate degree. The percent of the adult population in the two-county area with at least a high school degree (87.9%) is the same as the Wyoming average (87.9%) and 9 percent above the national average (80.4%). The percent of the adult population with a college or associate degree (27.7%) is comparable to both the Wyoming and national averages (29.9% and 30.7%).

Table 3. Population and Demographics for Converse and Natrona County, 2003

Converse Natrona Area County County Total

Total Population 12,601 67,687 80,288 Total Households 5,027 27,737 32,764

Population by Age

Under 5 6.1% 6.5% 6.5% 5 to 17 19.5% 18.2% 18.4% 18 to 44 34.8% 36.9% 36.6% 45 to 65 28.0% 25.5% 25.9% 65&Over 11.6% 12.8% 12.6%

Median Age 38.3 36.9

Income Level

Average Household Income $50,692 $49,696 Median Household Income $42,417 $39,394 Per Capita Income $20,614 $20,538

Below Poverty Level 11.4% 11.6%

Educational Attainment

Grade K-8 4.6% 2.8% 3.1% Grade 9-12, No Diploma 9.1% 9.0% 9.0% High School Graduate 35.4% 30.7% 31.4% Some College, No Degree 29.2% 28.6% 28.7% Associate Degree 7.1% 9.0% 8.7% Bachelor's Degree 10.9% 13.3% 12.9% Graduate Degree 3.7% 6.5% 6.1%

Source: Wyoming Business Council

13

Infrastructure

The infrastructure for the City of Douglas and the Town of Glenrock has been well maintained and has significant capacity for growth in terms of population, commercial, and industrial development. Per capita assessed valuation for Converse County is about 30 percent above the state average, which has allowed the community to invest in infrastructure. Much of the growth capacity in the infrastructure is a result of the expansion in the area during the energy boom.

Housing

The housing units in the two-county area totaled more than 35,000 in 2000 (Table 4). Nearly 90 percent of these units were occupied. Seventy percent of the housing units were owner occupied with 30 percent renter occupied. There were more than 9,000 rental units in the two-county area. Of the 4,000+ units in the area classified as vacant, 1,026 were for rent and 369 were for sale. Nearly 55 percent of the housing units in the area had been built since 1970. In 2002, the average sale price of an existing single family detached home in Converse County was $101,357 and $113,059 in Natrona County. Estimated rental housing costs in the fourth quarter of 2002 for Converse County were $407 per month for apartments, $143 per month for mobile home lots, $491 per month for houses, and $353 per month for mobile homes on lots. For Natrona County the estimated rental costs were $392 per month for apartments, $164 per month for mobile home lots, $623 per month for houses, and $507 per month for mobile homes on lots.

14

Table 4. Housing for Converse and Natrona Counties

Converse Natrona Area

County County Total

Housing Occupancy (2000)

Total Housing Units 5,669 29,882 35,551 Occupied Housing Units 4,694 26,819 31,513 Owner Occupied 3,475 18,740 22,215 Renter Occupied 1,219 8,079 9,298

Status of Vacant Housing (2000)

For Rent 286 740 1,026 For Sale 81 288 369 Rented or Sold, Not Occupied 47 231 278 Second Homes 319 923 1,242 For Migratory Workers 6 9 15 Other Vacant 236 872 1,108

Total Vacant 975 3,063 4,038

Year House Built (2000)

1999 to March 2000 1.9% 1.8% 1.8% 1995 to 1998 5.6% 3.1% 3.5% 1990 to 1994 3.6% 1.9% 2.2% 1980 to 1989 15.6% 14.1% 14.4% 1970 to 1979 39.7% 31.4% 32.7% 1960 to 1969 9.3% 11.4% 11.1% 1950 to 1959 6.1% 18.9% 16.8% 1940 to 1949 3.5% 6.3% 5.8% 1939 or earlier 14.6% 11.1% 11.7%

Average Sales Price (2002) $101,357 $113,059 (Detached Single Family Home)

Rental Housing Costs (Q4 - 2002)

Apartments $407 $392 Mobile Home Lots $143 $164 House $491 $623 Mobile Home on a Lot $353 $507

Source: Wyoming Housing Database Partnership Education and Training

Schools in the Douglas district have a total enrollment of 1,688

students attending six elementary schools, one junior high/middle school, and one high school. The pupil to teacher ratio is 13.3 to 1.

15

Schools in the Glenrock district have a total enrollment of 771 students attending three elementary schools, one junior high/middle school, and one high school. The pupil to teacher ratio is 11.9 to 1. Schools in the Casper district have a total enrollment of 11,650 students attending 29 elementary schools, five junior high/middle schools, three high schools, and one comprehensive (K-12) school. The pupil to teacher ratio is 14.8 to 1. The total enrollment for the three districts is 14,109 students.

Casper has its own two-year community college. Community and adult education programs are offered through Eastern Wyoming College in Douglas and in Glenrock for students seeking higher education foundation and vocational training. College courses through the University of Wyoming at Casper are also available.

In Douglas, private technology and workforce training is available through the Converse Area New Development Organization’s (CANDO) Tech Center. This center is focused on bringing technology to the workplace, enhancing existing jobs, and adding value to the workforce. The center teaches technology and using technology in developing a variety of workforce skills.

Workforce assistance is also available through the Wyoming Business Council led Wyoming Workforce Alliance. The Alliance focuses on short-term training programs including employee development, new frontline leaders, enhanced leaders, customer service, certified customer service specialist, certified manufacturing specialist, and certified warehousing and distributing specialist. Financial Assistance The state provides financial resource assistance to support businesses and their financial needs through the Wyoming Business Council, the State Treasurer’s Office, the State Lands and Investment Board, the Pipeline Authority and the newly created Infrastructure Authority. Each program has its own requirements, which should be reviewed with a specific company to address that company’s financial needs. The state provides loans, grants for infrastructure, equity investment and bonding authority in partnership with local governments and lending institutions. Health Care

Memorial Hospital of Converse County is a state licensed; Medicare

certified 25-bed Critical Access Hospital located near downtown Douglas. The hospital currently lists 15 doctors on staff. Other health

16

care services offered include Eastern WY Mental Health, Therapy Solutions, RLR Occupation Testing, North Platte Home Health Care, Aurora Home Care, and Michael Manor. The Glenrock Hospital District’s Glenrock Diagnostic and Treatment Center is a complete health care center and the Oregon Trail Rural Health Clinic serves patients five days per week. Extensive health care facilities are also available in Casper, which are only 50 miles from Douglas and 24 miles from Glenrock.

State and Local Tax Structure Wyoming has no corporate income tax, no individual income tax, no intangibles tax, no inventory tax, and a low sales and use tax. Currently, Converse County’s sales tax rate is 5 percent including the 4 percent state tax and a one percent local option tax. There is also a 2 percent lodging tax. As a result of recent actions by the Wyoming Legislature, effective July 1, 2004 there will be a sales/use tax exemption in Wyoming on equipment purchased for used in manufacturing. This exemption applies to business falling under North American Industry Classification System codes 31-33.

For property, residential and commercial property is assessed at 9.5 percent of fair market value; industrial property is assessed at 11.5 percent of fair market value; and minerals are assessed at 100 percent of fair market value. The current mill levy in Converse County ranges from 56.701 mills to 68.901 mills and averages 59.213 mills. The following table provides an example of the property tax calculations for Converse County.

Table 5. Converse County – Property Taxes

Commercial/ Residential Industrial Mineral

Property Value $100,000 $100,000 $100,000 Assessed Valuation Rate 9.5% 11.5% 100.0% Assessed Value $9,500 $11,500 $100,000 Average Mill Levy 0.059213 0.059213 0.059213 Total Property Tax $563 $681 $5,921

Workers Compensation rates vary from .025 percent to 14.70 percent depending on the occupation. The rate is adjusted according to each business’s record after two years. A list of selected worker compensation rates for Wyoming by industry is presented in Table 6.

17

Table 6. Selected Wyoming Workers Compensation Base Rates for 2004

Industry Group Coverage Type Base Rate %

Clerical Office CWD* 0.53 Temporary - Office CWD* 0.65 Temporary - Other CWD* 6.5 Coal Mining Required 1.05 Support for Mining Activities Required 3.13 Utilities Required 1.14 Building & General Contracting Required 7.77 Heavy Construction Required 7.6 Special Trade Contractors Required 7.49 Petroleum & Coal Products Manufacturing Required 1.15 Chemical Manufacturing Required 1.05 Wholesale Trade - Durable Goods Optional 3.36 Wholesale Trade – Non-Durable Goods CWD* 3.61 Transportation (Air, Rail, & Water) Required 2.94 Warehousing & Storage Required 6.59

* Employer must check with the Division of Employment for coverage requirement Source: Wyoming Department of Employment

The most common Unemployment Compensation rate for all industries is 1.15 percent on the first $15,900 of taxable wages. Adjustment factors are made after the initial period based on the employer’s rating. A list of all unemployment compensation rates for Wyoming is presented in Table 7.

Table 7. Wyoming Unemployment Standard Tax Rates for 2004

NAICS Grouping Rate %

Raw Materials & Energy Products 1.15 Goods Production 1.91 Distribution & Transportation of Goods 1.15 Information 1.15 Finance, Insurance, Real Estate 1.15 Professional & Business Services 1.15 Education, Health & Social Services 1.15 Accommodations & Food Services 1.15 Other Services 1.15 Public Administration 1.15 Not Classified Elsewhere 2.72

Source: Wyoming Department of Employment

18

Land Status

Converse County is situated between the predominately private lands in Niobrara County and the predominately public lands in Natrona County. Converse County is comprised of a mixture of private, federal and state lands with private lands being the dominant land status type. Nearly 2.0 million of the 2.7 million acres in the county are privately owned. There are approximately 400,000 acres of federal land in the county with most of that being administered by the U.S. Forest Service at Thunder Basin National Grasslands in northeastern Converse County and in the Laramie Peak portion of the Medicine Bow National Forest on the southern edge of the county. Most of the land administered by the Bureau of Land management is situated on the northwestern boundary with Natrona County. State lands, generally sections 16 and 36 of most townships, are fairly well dispersed throughout the county. The area between Douglas and Glenrock is for the most part private ownership. Because of the predominance of private lands in Converse County, land status should not be problematic for either suitability or compatibility for the project.

Community Assessments

The two primary communities in Converse County, Douglas and Glenrock, have both participated in a community assessments program conducted by the Wyoming Rural Development Council. These assessments involve an outside resources team visiting the community for three days to interview citizens, business and community leaders. The resource team then develops a set of recommendations for community improvements that are presented to the community. Both assessments teams noted a number of assets for Douglas and Glenrock including small town atmosphere, nice recreation facilities, close proximity to outdoor recreation activities, a rich and storied history, quality public services like fire and police, good public libraries, and a sense of community among residents. The reports also note that there is a strong sense of community pride in the county, that elected officials are dedicated, have a commitment to the towns they serve, and that there are many community activists that care about the future of their community. Both resource teams concluded that Douglas and Glenrock have a solid base that can be built upon. Coal Capacity and Reserves

Wyoming leads the nation in coal production and ranks third in coal reserves with 14.4% of the total coal reserves behind Montana and Illinois. The Wyoming Geological Survey estimates that Wyoming has 68.7 billion tons of coal. Wyoming’s coal is bituminous or sub-bituminous which has higher heat energy than lignite. Wyoming’s coal is also valued for its extremely low sulfur content of 0.4% to 0.6% compared to eastern U.S. coal at 3.0% to 5.0%.

19

Using Wyoming coal lowers the cost of reducing emissions from a facility because low sulfur coal does not require expensive scrubbers to comply with the Clean Air Act. In 2003, Wyoming coal mines produced 380 million tons, 97% from the Powder River Basin. Even with this production, coal mines in Wyoming have excess capacity to provide coal under current mining leases. Projected coal consumption for a coal-based hydrogen facility is 10.84 million tons per year. This incremental consumption could be handled with the current excess capacity. The Wyoming Geological Survey has calculated Wyoming coal capacity based on the current production rate of 378 million tons a year. Given that parameter, the Survey estimates that the existing reserve base is good for at least 20 years.

Table 8. Current Coal Production and Remaining Capacity

Mine Name Production Limit (in millions) Remain Reserves Cordero & Caballo Rojo 65 447,057,677 North Antelope Rochelle 105 1,757,160,827 Buckskin 27.5 331,855,839 North Rochelle 35 268,056,913 Antelope 30 481,679,474 Belle Ayr 25 499,281,058 Black Thunder 100 1,227,445,360 Dry Fork 15 329,410,777 Caballo/ Rocky Butte 40 724,522,958 Eagle Butte 35 464,761,974 Jacobs Ranch 50 726,351,983 Rawhide 24 557,015,381 Wyodak 10 259,879,139 TOTALS 561,500,000 tons / year 8,074,479,360 tons

Source: Wyoming Geological Survey

In addition, the Bureau of Land Management has 10 Lease by Applications (LBAs) pending for auction over the next 4 to 5 years. The LBAs total 21,192 acres with approximately 2.16 billion tons of federal coal that will be produced. Almost 100% of the coal in Wyoming is on federal lands.

Comparing the cost of mined coals for fuel and for conversion to another product, locating a facility close to Wyoming coal mines lowers the cost of the facility’s operations. Wyoming coal is by far the least expensive coal when compared to coal mining costs in other large coal producing states. And Wyoming coal is more economical despite being transported further to steam electric plants than interior or Appalachian coal.

20

Table 9. Average Open Market Sales Price of Coal by State and Coal Rank, 2002 (Dollars per Short Ton)*

State Total Colorado $17.72 Illinois $24.04 Kentucky $27.77 Montana $ 9.27 New Mexico $22.47 Virginia $31.09 West Virginia $29.59 Wyoming $ 6.37 U.S. Average $17.98

*Note: Open market includes all coal sold on the open market to other coal companies or consumers. An average open market sales price is calculated by dividing the total free on board (f.o.b.) rail/barge value of the open market coal sold by the total open market coal sold. Excludes mines producing less than 10,000 short tons, which are not required to provide data. Excludes silt, culm, refuse bank, slurry dam, and dredge operations. Totals may not equal sum of components because of independent rounding. Source: DOE – Energy Information Administration, US Dept. of Labor, Mine Safety and Health Administration

With ample rail transportation available (discussed later in the study), close access to large amounts of inexpensive and environmentally cleaner coal product for value added facilities is a major plus for the Converse County area.

V. NATURAL RESOURCE CONSIDERATIONS

Fish and Wildlife Issues Converse County’s varied land surfaces such as grassy plains, sagebrush covered foothills and riparian areas support a diversity of wildlife. The primary big game species occupying Converse County are antelope, mule deer, white-tailed deer, elk, and bighorn sheep. In addition to big game, Converse County typical of other areas in the short grass prairie ecosystem occurring east of the Continental Divide is host to a variety of small and non-game species. A complete list of these non hunted species can be found in the Wyoming Game and Fish Department’s “Non-game Bird and Mammal Plan.” Converse County is in Central Waterfowl Flyway and hosts a variety of seasonally migrating waterfowl.

There are several important wildlife considerations in siting any large facility such as a coal gasification plant or other coal value added facility. Among the most important considerations are crucial or critical seasonal ranges for big game and the migration corridors into and out of those crucial habitats. In addition, the occurrence of threatened and endangered species and the delineation of their habitats can and do affect siting locations. In the event that siting an industrial plant of any type became a reality, specific wildlife surveys and in depth analysis would have to be conducted in coordination with the Wyoming Game and Fish

21

Department or in the case of threatened or endangered species, consultation must be made with the U.S. Fish and Wildlife Service. Listed below are general observations of the big game species season ranges based on maps and data provided by the Wyoming Game and Fish Department.

Elk: Maps provide by the Wyoming Game and Fish Department indicates that the Crucial Winter Range (CRUWIN) and Crucial Winter Yearlong Range (CRUWYL) as well as Spring Summer Fall Range (SSF) occur primarily south of Interstate 25 and into the Medicine National Forest. There is Winter Year Long Range (WYL) and Yearlong Range (YRL) in the northeastern corner of the county. There is also some Yearlong Range in the northwestern corner. Most of the area between Glenrock and Douglas is either Not Occupied Habitat (NOH) or is designated in the “Out” category for elk.

22

23

Bighorn Sheep: According to the maps provided by the Wyoming Game and Fish Department all important bighorn sheep habitats including Crucial Winter Range (CRUWIN), Spring Summer Fall Range (SSF), Crucial Winter Year Long (CRUWYL) and Yearlong Range (YRL) are south of Interstate 25 and into the Medicine Bow National Forest.

24

Antelope: As is typical of central Wyoming, the majority of Converse County is designated as either Yearlong Range (YRL) or Winter Yearlong Range (WYL). There is some Crucial Winter Yearlong range (CWYL) south of Interstate 25. There is some Yearlong/ Seasonal Winter Range (YRL/SWR) in an area on both sides of Interstate 25 going from Douglas south easterly to Orin Junction as well as in the north eastern corner in the Thunder Basin National Grasslands. There is a fringe of Spring Summer Fall Range on the north western boundary with Natrona County.

25

26

Mule Deer: The maps provided by the Wyoming Game and Fish Department on Mule Deer are not complete and do not show any seasonal ranges. However, there are very few habitat areas of Converse County which are not used as summer or yearlong range for Mule Deer. Winter ranges follow the foothills of Laramie Peak and are most likely interspersed throughout the County.

27

White-tailed deer: The maps provided by the Wyoming Game and Fish Department show that the North Platte River corridor and other riparian areas along perennial and ephemeral streams in Converse County provide the only yearlong range for White-tailed deer. Outside of these riparian corridors there are no seasonal ranges for White-tailed deer.

28

Endangered Species Issues

According to the U.S. Fish and Wildlife Service, there are 10 species of plants or animals listed as either threatened or endangered that are known to occur or have occurred in the past in Converse County. They are: Black-footed Ferret, Preble’s Meadow Jumping Mouse, Ute Ladies-Tresses, Bald Eagle, Whooping Crane, Interior Least Tern, Piping Plover, Pallid Sturgeon, Eskimo Curlew and the Western Prairie Fringed Orchid. The Canada Lynx, a threatened species, is also thought to have occurred in Converse County. In addition, Converse County is home to 2 candidate species, the Boreal Toad and the Black-tailed Prairie Dog. Based on information from the Wyoming Natural Diversity Data Base (WNDDB), there are 6 species of plants and animals known to currently occur in Converse County, which are designated as threatened or candidate species under the Endangered Species Act. Of the six species there are three mammals, one bird, one amphibian and one plant. They are: Preble’s Meadow Jumping Mouse (threatened mammal), Canada Lynx (threatened mammal), Boreal Toad (candidate amphibian), Ute ladies-tresses (threatened plant), Bald Eagle (threatened bird) and Black-tailed prairie dog (candidate mammal).

29

Preble’s Meadow Jumping Mouse: This species was listed as threatened in 1998 and is thought to occur in portions of Converse County. The WNDDB provided maps, which showed suspect mouse capture sites as well as predicable suitable habitat. Most of the predicted suitable habitat occurs south of the North Platte River and in portions of Northwest Converse County. Predicted habitat notwithstanding, the U.S. Fish and Wildlife Service actually designated critical habitat for the mouse on July 23, 2003. The designation of critical habitat included 8 habitat units totaling 31,222 acres in Colorado and Wyoming. In Wyoming only one unit, NP1 (Cottonwood Creek) involves a very small area in Converse County. This area is in the extreme south central portion of Converse County along the foothills of Laramie Peak. This is the only threatened or endangered Species with designated critical habitat in Converse County.

30

Canada Lynx

Boreal Toad

31

Ute Ladies-tresses

Bald Eagle

32

Black-tailed Prairie Dog

Vegetation Issues Converse County has diverse vegetation ranging from plants associated with the northern desert shrub communities and plants occurring within the short grass prairie ecosystems east of the Continental Divide. Dominant grasses are blue grama, buffalograss, western wheatgrass and needle and thread grass. Common shrubs in Converse County are big sagebrush, black sage and rabbitbrush. Vegetation in the lower elevations is sagebrush-short grass prairie while the higher elevations, notably the foothills of Laramie Peak have extensive coverage of mountain mahogany and bitterbrush giving way as the elevation increases to lodgepole and ponderosa pine forests intermingled with aspen and meadows. Domestic agriculture production includes alfalfa and native hay, winter wheat, oats and barley. There doesn’t appear to be any significant vegetation issues outside of the Thunder Basin National Grasslands when considering a major development. Because of the presence of Ute Ladies-tresses in northeastern Converse County and the possible presence of the Western Prairie Orchid, surveys would be warranted to exclude the possibility of their occurrence on any construction site regardless of whether the property rights are private or public.

33

Air Quality

Ambient air quality standards and visibility are critical components of analysis for new sources of emissions. These standards are set to protect public health and to assure that best available control technology is utilized to reduce and eliminate air pollution emissions.

Air quality monitoring is done with particular matter monitors. The eastern side of the Powder River Basin has one of the most extensive air monitoring networks in the nation due to the number of coal mines in the area. Monitoring is used to measure not only pollutant levels but also compliance. There are also monitors for nitrogen oxides on the east side of the basin and two visibility monitoring stations.

Generally, air quality throughout the Converse County area and particularly in the rural areas is good. There are limited emission sources and good atmospheric dispersion. Prevailing winds are from the southwest but local wind conditions reflect channeling (mountain and valley flows) due to complex terrain. Night cooling enhances stable air and inhibits air pollutants mixing and transporting along valley drainages.

Any entity that is considering a project such as a 275 megawatt coal gasification

plant or a coal-based hydrogen plant, should consult early in the siting decision-making process with the Wyoming Department of Environmental Quality (DEQ) and federal land managers. For the Converse County area, the US Forest Service would need to be consulted. As a rule, the Forest Service consults with the National Park Service (NPS) as to what restrictions or issues affecting air quality are important to the facility and proposed location. It is important that these federal land managers are a part of the process at the beginning, rather than toward the end of the permitting processes to prevent delays in the process and appeals. During a permitting process, new requirements can be considered throughout the entire process. There are several NPS areas of concern in western South Dakota that might be impacted by emissions from a new source. Areas of concern are usually those air quality areas that are the “cleanest” and commonly referred to as Class 1 areas. Although the DEQ uses 100 kilometers as a rule of thumb when assessing receptors (specific sites that could be impacted by air quality issues), there is no hard and fast rule regarding that distance. The NPS generally likes to see a greater distance. In recent years, it has not been unusual to see the NPS propose 300 kilometers from the Class 1 area edge. Given that Two Elk (250 MW) and WyGen2 (500 MW) are going through the permitting process and if either one of these plants were under construction or completed in a time frame when a project in Converse County was seeking permits, the principals would need to consult with the NPS before choosing a

34

location. The NPS would be monitoring permitting processes to prohibit potential significant deterioration of a Class 1 designation such as the one at Wind Cave National Park in South Dakota. A benefit to locating a facility in Converse County is that the emissions signature for the county is good overall so the ambient air quality could allow for fairly substantial increment consumption. Also, most of the county is located south of Wind Cave National Park in South Dakota and the prevailing winds of the area pass below the park. As a result, the park might not be considered in the permitting process. The farther south and west a facility site could be located within the county, the less the Class 1 air over Wind Cave affects ambient air quality and visibility permitting.

The three other areas of concern for any potential facility are using Best Available Control Technology (BACT), doing dispersion modeling and showing compliance with ambient air quality standards and increments for the immediate area, and identifying what the major hazardous air pollutants (HAP) would be. HAP is any pollutant that is greater than 10 tons or 25 tons of any combination of pollutants.

The air quality regulations do not actually require that plants use the very best technology available but rather they review to determine if a project proposes or is using the most technologically feasible and economically reasonable control technologies.

The real starting point in the DEQ consideration for permitting is the source. If it is a major source where there might be concerns related to the Prevention of Significant Deterioration (PSD) (which would be 250 tons/year of a regulated pollutant such as NOX, SO2 or PM10) or if it is a “named” source such as a power plant then there is significant analysis for permitting. The source size is a major consideration. Also, permitting a new technology is more difficult as there is less information on which to base decisions. The process takes longer and the permit most likely will have more restrictions and monitoring. This is true throughout the nation.

Additionally, if there is overlap of development/production such as with the Powder River Basin where there is coal mining, coalbed methane production, power plants, traditional oil and gas production and so on, modeling on a regular basis may be required to ensure that the increment is not being consumed.

Other existing projects in the Converse County area that should be factored in are

the Dave Johnston Power Plant and the Douglas Gas Plant on Highway 59. The Williams Gas Gathering Facility near Natural Bridge could be a factor if a proposed location was close to that facility. Pending permits would be factored in also.

35

Wyoming does not have a cap and trade program so there is no mitigation programs available to new and/or expanding sources.

As a point of reference, the Thunder Basin Airshed, which includes the Thunder Basin, Ogallala and western half of the Buffalo Gap National Grasslands, was recently evaluated through both the Thunder Basin Environmental Impact Statement (EIS) and the WYODAK EIS processes. This airshed is affected by oil and gas development in the Bighorn Basin and Powder River Basin (PRB) in Wyoming and in the Billings, Montana area. Pollutants are carried into the airshed by northwesterly winds. It is also affected by coal mining in the PRB. There were no known emission sources in the South Dakota or Nebraska portions of the airshed other than some projected oil and gas development. In Wyoming, in addition to the oil and gas development, the Dave Johnston Power plant is an emissions source in the study area. Projected future emissions include coalbed methane field development in the PRB and increased gas processing and power generating facilities in northeastern Wyoming and the Casper area. Water Quantity and Water Quality

Because of the North Platte River litigation and subsequent decree, availability of water in the North Platte River Basin can become a limiting factor in not only new industrial uses but in new agricultural and recreational uses. There is, however, available water from two sources – drilling deep wells into the Madison Formation and the purchase of existing agricultural water with a conversion to industrial use. The following discussion on water is fairly general in nature because to do a thorough hydrological assessment requires in-depth analysis by water experts and hydrological specialists both of which are beyond the scope of this feasibility study. It does appear that after several meetings with the State Engineer and the Director of the Water Development Commission that there are at least two sources for purchase of and conversion of existing water rights in the immediate area. It was their professional opinion that the surface acre feet of water available through purchase and conversion of either of these two known areas would be sufficient to run a 275 megawatt coal gasification plant. In addition to that possibility, data suggests that there is adequate water available in the Madison Formation. Water from the Madison formation is not limited by quantity but rather by quality and temperature. According to several state officials that were interviewed relative to the annual water consumption by energy processing and production facilities, it is difficult to quantify the amount of water required in absence of plant and engineering design, water temperature, and siting issues determined such as elevation and ambient air temperature. However, according to those officials, several plant schematics, and The Last Straw – Water Use by Power Plants in the Arid West by The Energy Foundation and the Hewlett Foundation (April 2003), it is estimated that the range for a 275 megawatt facility is between 10,000 and 15,000 acre feet of water per year.

36

Madison Formation

Water quality is highly dependent upon where a well is drilled. In some areas, the quality is very good and in others, not good at all. Deeper in the formation, the water is highly mineralized. Flow is generally good but flow and temperature are quite variable.

There is evidence that the Madison formation gets substantial recharge from Little Boxelder Creek and Cottonwood creek.

It has been reported to us that Panhandle Eastern Pipeline drilled three deep wells (approximately 6500 feet) for industrial use.

The depth of the Madison below the surface increases in a westward direction from the Black Hills towards the Big Horn Mountains. Maximum depths would be reached in the northeastern part of Converse County. The thickness of the formation varies from less than 200 feet in the southern portion of the area to more than 800 feet along the Wyoming-Montana state lines. Depth also varies from a few hundred feet to 16,000 feet.

Recharge areas are found in the Black Hills (25,550 af/yr), Big Horn mountains (43,500 af/yr), Laramie Range (3,400 af/yr) and Hartville Hills (2,800 af/yr). Water quality from these test wells was excellent.

These test wells averaged 400-600 gallons per minute whereas wells drilled in Weston and Crook counties, also from the Madison formation ranged anywhere from 100-1,500 gallons per minute.

Water Quality

Waste disposal is a significant issue and the types of waste produced will be, to a large degree, dependant on facility design. It must be acknowledged that all coal contains minerals. In the gasification process, the reaction of producing gas from coal can produce carbon monoxide, carbon dioxide, hydrogen, sulfur, nitrogen and other substances. Some of these substances, such as carbon dioxide, hydrogen, and nitrogen can be sold as a value added by-product of coal gasification. However, some substances which cannot be marketed can create potential hazardous waste and must be dealt with pursuant to the water quality permitting processes of the DEQ.

37

VI. CULTURAL AND HISTORICAL RESOURCE CONSIDERATIONS Converse County is rich in the historical and cultural context of Wyoming and the west. Fort Fetterman was built in 1867, 21 years before Converse County was established. Fort Fetterman was constructed to protect segments of the Oregon and Bozeman trails which traversed through Converse County and to serve as a major supply depot for the army operating against the Indians. The City of Douglas was founded, on the banks of the North Platte River and the Oregon Trail in 1886 followed by the creation of Converse County in 1888. The Oregon Trail (1843-18680), The Mormon Trail (1846-1868), California Trail (1841-1868) and the Pony Express Trail (1860-1861) ran roughly over the same the route south and parallel to the North Platte River from Douglas to Glenrock. Child’s Cutoff, of the Oregon-Mormon-California Trail ran north of the North Platte River and rejoined the main route at Red Buttes near Casper. The presence of this Congressionally recognized trail could present viewshed issues when developments of structures are being considered near areas adjacent to where the trail occurs on public lands. Although most of the land along the North Platte River from Douglas to Glenrock is private and consequently may not present viewshed issues, the following map shows a two mile viewshed buffer along the entire stretch of the river on both sides for demonstration purposes only. The State Historical Preservation Office and The Wyoming Chapter of the Oregon-California Trail Association should be consulted prior to any significant development.

38

39

VII. SOCIAL AND ECONOMIC IMPACT The construction of a power plant has not been a frequent occurrence in Wyoming in recent years. As a result, it is difficult to be precise in estimating the economic impact of such a project. In addition, the proposed coal gasification facility is rather unique in nature, which it makes it even more difficult to be precise. The following analysis was based on information from the Request for Waiver of Permit Application for the Two Elk Power Project, February 13, 1997. Two Elk is a proposed power plant to be located on private land in Campbell County. It would be located on a 40-acre site, 20 miles southwest of Wright, Wyoming. The plant would use an air-cooled steam boiler to generate 250 megawatt of electric power, which would be transmitted by high voltage lines to the regional power grid. The plant would burn waste coal and coal from the Black Thunder Mine. The Two Elk’s application estimates that it would take two years (eight quarters) to construct the plant. Despite the somewhat smaller size (250 MW vs. 275 MW) and differences in technology, it is hoped that the Two Elk’s information will provide a ballpark estimate of the economic impacts of construction and operation of a power plant in Wyoming on the economy of the local community. If anything, the following are probably a conservative estimate. Construction and Operation Employment Table 10 presents the quarterly estimates of construction and operation

employment of the coal gasification facility. It is estimated that the facility would create a total of 752 direct jobs at the peak of construction in the fourth quarter of the project. Also, it is estimated that a total of 50 permanent jobs would be available when the plant is at full operation. Anticipated peak quarterly construction employment would represent less than two percent of current total covered employment in the two-county area. Anticipated operation employment would represent slightly more than 0.1 percent of current total covered employment in the two-county area.

Table 10. Estimated Project Employment

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

Construction 160 304 483 747 737 528 351 0 Operation 1 2 5 5 5 10 25 50

Total 161 306 488 752 742 538 376 50

Source: Two Elk Generation Partners, Limited Partnership, December 1996

40

Local Hiring – Construction Workers

Estimates of local hiring for construction workers are based on Campbell County’s experience with BHP&L during the construction of the Neil Simpson power plant. Construction of the Neil Simpson power plant indicates a local hire rate of about 40 percent. This assumption implies that the proposed coal gasification facility would be able to hire 301 local workers during the peak construction quarter (Table 11). Anticipated peak quarterly local hire construction employment would represent about 5 percent of total construction, repair, mining and precision craft and repair employment in the two-county area. Anticipated peak construction employment would also represent less than 20 percent of total unemployed workers in the region.

Table 11. Estimated Local and Non-Local Project Employees

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

Local 65 123 196 301 297 216 153 25 Non-Local 97 183 292 451 445 322 223 25

Total 162 306 488 752 742 538 376 50

Source: Two Elk Generation Partners, Limited Partnership, December 1996

Non-Local Construction Worker Households

Based on experience with large construction projects in Wyoming, the Two Elk analysis assumed that 53 percent of all non-local construction workers would relocate to the area single-status (without other household members). The remaining 47 percent are assumed to relocate to the area with household members. The average household size for non-local workers with household members was assumed to be 2.63. Since construction workers often share living quarters, it was assumed that single-status non-local workers averaged 1.2 workers per housing unit. These assumptions were also used for the analysis of the coal gasification project

Secondary and Operation Workers

The proposed power plant would result in substantial economic activity in Converse and Natrona County. This economic activity would flow from local spending associated with the construction and operation of the facility and from local spending by construction and operations workers. The local spending resulting from the project

41

would generate secondary employment opportunities in the area’s economy. At peak construction it is estimated that secondary employment would be about 227 jobs. Once operations have begun an estimated 25 secondary jobs would be generated.

Local Hiring – Secondary and Operation Workers

Given the type of jobs associated with secondary employment, it is assumed that 90 percent of the secondary employment associated with the project during construction would be filled by local workers and 80 percent of the secondary employment associated with the project during operation would be filled by local workers. Under these assumptions, peak non-local secondary employment during construction is estimated to total 23 jobs. Once operations have begun estimated secondary non-local employment is expected to total 5 jobs. Similar to the Two Elk analysis, it is assumed that 25 of the operations workers would be hired from the local labor force.

Population Increase Due to the Project

Based on the foregoing estimates and assumptions, the project would generate

an estimated peak population increase of about 671 individuals during the fourth quarter of construction and 84 individuals when the project is operational (Table 12). The peak level increase in population would represent less than a one percent increase in the total population for the two-county area. The operation increase in population would represent a 0.1 percent increase in the area’s population.

Table 12. Total Population Increase Projections

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

Project 135 257 411 632 624 456 331 75 Secondary 8 16 26 39 39 29 22 9

Total 143 273 437 671 663 485 353 84

Source: Planning Information Corporation, February 1997

School Enrollment Increase

During the construction phase, an estimated peak quarterly enrollment of 74 new students is anticipated (Table 13). The estimated increase in school enrollment during the operation phase of the project is 26 students. The estimated distribution of the students is 54 percent elementary, 25 percent junior high, and 21 percent high school. The peak level increase in school

42

enrollment would represent slightly more than 0.5 percent of the total school enrollment in the two-county area. The operation increase in school enrollment would represent about 0.2 percent of total school enrollment in the two-county area.

Table 13. Total School Enrollment Increase

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

Project 16 30 49 74 73 56 47 26Source: Planning Information Corporation, February 1997

Housing Demand

During the construction phase, estimated peak quarterly housing demand is

estimated to be 395 units (Table 14). The estimated increase in housing demand during the operation phase of the project is 29 units. The peak level increase in housing demand would represent 28 percent of the total vacant housing for sale or rent in the two-county area. The operation phase increase in housing demand would represent 2 percent of the total vacant housing for sale or rent in the two county area. Some of the construction phase demand for housing would be satisfied through motel rooms and recreation vehicles.

Table 14. Total Housing Demand Increase

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

Project 84 160 256 395 390 283 199 29Source: Planning Information Corporation, February 1997

43

The following table summarizes the population and housing assumptions used in the social and economic impact analysis discussed above. These assumptions were based on information from the waiver permit application for the proposed Two Elk power plant in Campbell County, Wyoming.

Table 15. Summary of Population and Housing Assumptions A. Population Increase Due to Project Employment

Average Family Size per Construction Worker: 53 Percent Single 47 Percent Married (average household size 2.6) Average Family Size per Operations Worker: 3.0 Workers per Household: Construction 1.2 Operations 1.0

B. Population Increase Due To Secondary Employment Secondary Employment per Construction Worker: 0.3

Secondary Employment per Operations Worker: 0.5 Percentage of Secondary Employees who are Non-Local: Construction Generated: 10 percent Operations Generated: 20 percent Average Family Size per Secondary Worker: 53 Percent Single 47 Percent Married (average household size 2.6)

Secondary Workers per Household: 1.2 C. School-Aged Children per Non-Single, Non-Local

Secondary Worker: 0.4 (Per married worker) Operations Worker: 1.0 Construction Worker: 0.15 (Per non-local worker)

D. Housing Unit Demand Employees per Housing Unit:

Construction and Secondary: 1.4 Operations: 1.0

VIII. PERMITTING ISSUES AND REQUIREMENTS

The siting of a large facility such as a 275 megawatt coal gasification plant requires analysis and subsequent permits at the local level, state level and federal level. Although not an exhaustive list, it should be assumed that the following requirements and permits would be necessary:

• The National Environmental Act (NEPA) will require an Environmental Impact Analysis. Unlike the Endangered Species Act and the Clean Water Act, NEPA does not regulate or manage the outcomes; it is instead a procedural law. NEPA requires federal agencies to “consider the

44

environmental impacts of their proposed action…”. NEPA also requires federal agencies to cooperate, coordinate and work with all levels of government – local, state, and federal – as well as concerned private and public organizations. It is this requirement by NEPA, with enforcement by the White House Council on Environmental Quality, which results in the Environmental Impact Statement (EIS) document being a de facto coordination document. The EIS process will review and analyze beneficial use, public health and safety, economic and social issues, characteristics and ecologically critical areas, highly controversial impacts, uncertain impacts, precedent setting impacts, cumulative actions and impacts, National Registry of Historical Places, endangered or threatened species or habitats, and violation of federal, state or local laws. It is the comprehensive nature of the EIS that allows a well-done EIS to become the umbrella document for other permits and requirements.

• Permits will be required from the Wyoming DEQ under the auspices of the

Clean Air Act, including Clean Air Conformity Analysis (see Section V. Natural Resource Considerations discussion on air quality).

• The siting will have to conform to the federal Clean Water Act administered

by the Wyoming DEQ. This will include wastewater discharge permits (see Section V. Natural Resource Considerations discussion on water quality).

• Because of the known presence of threatened and endangered species as well

as candidate species, the U.S. Fish and Wildlife Service will need to be consulted.

• A cultural and historical review will be required by Section 106 of the

National Historic Preservation Act through the State Historic Preservation Office.

• Permits will need to be obtained from the state by virtue of the State of

Wyoming Industrial Development and Siting Act based on the size of the proposed facility.

• After completion of the EIS, approval for any transmission components will

be required by the Wyoming Public Service Commission.

• Use of either subsurface or surface water will have to be permitted by the Wyoming State Engineer’s Office and because of the North Platte River Settlement Agreement approval may also be required from the North Platte River Settlement Commission.

• Communication and coordination with Converse County and its incorporated

cities and towns are necessary and there may be some local permitting required.

45

As mentioned, this is not an exhaustive list of permits that may be required. Several of these requirements occur simultaneously with the EIS process while some require the completion of the EIS prior to permitting. Prior to a project of this magnitude going into the environmental and permitting phases, it is recommended to first have a situational analysis conducted which will fully delineate not only the various requirements and permits needed, but will also identify those factors which will be the most problematic.

IX. CARBON SEQUESTRATION CONSIDERATIONS Wyoming is uniquely positioned to become an integral part of the carbon dioxide (CO2) sequestration research, demonstration, and market development going on today. With concerns regarding the impact CO2 emissions have on the atmosphere, new and renewed efforts are being undertaken to increase utilization of cleaner burning fuels such as gas, to develop the science and market that allows us to move from a fossil-fueled economy to a hydrogen-fueled economy, and to convert what was once waste product from fossil fuel combustion into usefully, marketable by-products. The City of Douglas, Converse County, and Wyoming have many of the components needed to participate in these initiatives. One of the potential benefits of locating a coal gasification production facility and a coal-based hydrogen producing facility near Douglas is the ability to efficiently capture the CO2 emissions and store those emissions in geological formations under Converse County and in Natrona County. The Rocky Mountain Oilfield Testing Center (RMOTC), primarily funded by the US Department of Energy, has been working on sequestration and has begun pilot testing and commercial production in the largest test site known in the world. This site is north of Casper. RMOTC is also part of the newly formed Rocky Mountain regional consortium of academic, industrial, governmental and non-profit organizations working together to validate CO2 sequestration technologies in geological formations. With its geological formations that are suited for CO2 injection research to study temporal capabilities and market uses, the Converse County area has substantial potential to join in the partnership activities. The following map indicates the potential of the area for CO2 sequestration and market demonstration of enhanced oil recovery.

46

47

The use of CO2 to enhance oil and gas recovery, such as in coalbed methane gas recovery, has been a common practice of the industry when prices would support the operation. According to RMOTC, in the year 2000 in the United States, 34 million tons of CO2 were injected underground for enhanced oil and gas recovery – equivalent to the CO2 emissions of 6 million cars in one year. However, there are renewed efforts to find ways to make CO2 injection more cost effective and productive because of the concern over greenhouse emissions and global warming and the need for increased fuel development in the United States to meet consumer demand. To even out the greenhouse emissions pumped into the atmosphere, 500MM tons a year of CO2 needs to be buried. With Wyoming processes emitting 89MM tons a year, the state can become a primary supplier of the CO2 that needs to be buried. CO2 by-products of coal gasification and coal-based hydrogen processing can be captured and fed into the pipelines going to RMOTC and to private industries using the product for enhanced oil and gas recovery. Improved technology and systems will need to be installed with the construction of the facilities to make the capture cost competitive in the market. The State of Wyoming has recently joined in on CO2 demonstration efforts through the passage and funding of the Enhanced Oil Recovery project staffed through the Institute of Energy Research housed at the University of Wyoming. According to the Institute’s Director, the site for the demonstration has not been chosen and the fields within Converse County, while originally not in consideration, could be included in site consideration in the spring of 2004 given the evidenced interest by the community. The Director has also offered to meet with community leaders on this portion of the project. One of the goals of the pilot project would be to research reservoir characteristics. Researchers will want to be sure that once the CO2 is injected in the ground, it doesn’t come back up, and what would be required to assure that doesn’t happen. The plans are to begin trucking 10,000 tons of CO2 to RMOTC in 2005 and begin piping the CO2 in 2006. CO2 suppliers to the pipeline would be needed. As use of the enhanced oil and gas recovery increases, industry will be searching for CO2 suppliers. Companies competing internationally, such as Anadarko, BP, Shell and Chevron to name a few, are already meeting European standards and have the added benefit of understanding the new market because of those efforts. In the area near Converse County, Anadarko plans to bring back aging oil fields by injecting CO2 into the reservoir at RMOTC that would otherwise been vented into the atmosphere. Over the lifetime of the Salt Creek and Monell projects, Anadarko expects to sequester about 29M tons of CO2. While Anadarko has CO2 supplies secured for current operations, the company expects to require up to 125 mcf/day CO2 when in full operation and will be in the market for additional CO2 to meet that quota even though it will re-inject its own CO2 emissions back into the system, repeating the process. Douglas and Converse County could benefit through efforts to sell CO2 to companies such Anadarko and/or to encourage the owners of the older oil and gas fields within the county to deploy enhanced recovery practices.

48

One other alternative marketing initiative exists that companies considering operating coal gasification, coal-based hydrogen production, electric generation, clean diesel fuel processing, or fertilizer processing should analyze to assist in increasing profitability is the Chicago Climate Exchange (CCX). The member-only trading exchange is the first multi-national, multi-sector marketplace. Members may be electric power plants, fossil fuel combustion emitters in the manufacturing sector, and other companies and entities that emit greenhouse gases and commit to reduce or mitigate emission during the 2003-2006 period. Municipalities and other institutions can also be members. While current exchange trading is still below commercial prices, experts believe that future trading will assist in securing greenhouse emissions as a commercial product worthy of being captured rather than vented into the atmosphere. X. PRODUCT MARKETABILITY The proposed facility would produce a number of products including: hydrogen, electricity, carbon dioxide, natural gas, and low-sulfur diesel. The marketability of each of these products is briefly discussed below. A full market analysis of each product is beyond the scope of this analysis.

Hydrogen The current world market for hydrogen is estimated at about $60 billion (U.S.) annually and the primary use is for production of fertilizer (hydrogen is used to create ammonia fertilizer). It is estimated that 60 percent of the world hydrogen production is used for this purpose. An additional 23 percent is used for oil refining, 9 percent in the production of methanol, and 8 percent for other uses. Only a very small portion of hydrogen is currently used directly as fuel. However, with continuing work on hydrogen fuel technology, this market is expected to increase in the future. Today most hydrogen in the United States, and about half of the world’s supply, is produced from natural gas. Although natural gas will likely provide the earliest affordable feedstock for hydrogen, today’s costs are prohibitively expensive. To bring the costs down, the U.S. Department of Energy has embarked on an aggressive research program that includes new efforts to develop innovative technologies for extracting fuel-grade hydrogen from other resources such as coal. The goal of the program is to build a new energy economy based on hydrogen such as hydrogen-fueled gas turbines to produce electricity, fuel cells for cars, etc. with reduced pollution and greenhouse gases emissions. The U.S.’s abundant coal resources offer an attractive mid-term option for producing the large quantities of hydrogen that will be required to fuel the hydrogen based energy economy. Initially, hydrogen will probably be produced in coal gasification facilities capable of co-producing electric power and other high-value fuels and chemicals. With carbon sequestration, coal could be used to produce hydrogen for many decades without adding to concerns over

49

the buildup of carbon gases in the atmosphere. New technologies developed through this research could substantially boost the demand for hydrogen. Ammonia was produced by 17 companies at 34 plants in the United States during 2003. Over one-half of this production was centered in Louisiana, Oklahoma, and Texas due to their large reserves of natural gas, the dominant feedstock. In 2003, U.S. producers operated at about 60 percent of their rated capacity. A sharp increase in natural gas prices in the beginning of 2003 resulted in the temporary closure of a significant portion of the U.S. nitrogen production capacity. By the end of February, two-thirds of the U.S. production capacity was idled. Much of this capacity was brought back on line by October as natural gas prices declined. Despite these fluctuations the United States remained the second largest ammonia producer and consumer in the world following China. The Wyoming Market Research Center notes that facilities in Wyoming that produce or utilize ammonia include: • Coastal Chemicals, Inc. – Cheyenne • SF Phosphates Limited Company – Rock Springs • FMC Corporation – Rock Springs • Colorado Interstate Gas – Table Rock Plant – Rock Springs • Torrington Simplot Soilbuilders – Torrington • Panhandle Cooperative Fertilizer – Torrington • High Plains Coop Fertilizer – Pine Bluffs • Power Resources, Inc – Highland Uranium Project – Douglas • Jirdon Agri Chemicals – Torrington • Bairoil OC CO2 Plant – Bairoil • UAP Northwest – Worland Ammonia fertilizer also plays an important role in coal mining in the Powder River Basin where it is use to make the explosives used to blast the coal for mining. The hydrogen market has tended to exhibit a large degree of price volatility. Between 1997 and 2002 the price ranged from a low of $1.25 to a high of $2.60 per thousand standard cubic feet (SCF) of compressed gas. Current prices are $1.70 to $2.60 per SCF. The Innovations Group indicates that the outlook for hydrogen remains strong. The industry gas majors, Air Products, Praxair, Air Liquide, and BOC, have all raised their prices for hydrogen, based on strong demand. This pricing trend is expected to continue. U.S. hydrogen demand is projected to grow by 4 percent per year during the next few years. Many industrial users currently own and operate their own hydrogen plants. However, as industry comes to view hydrogen as a utility, more industrial gas companies will build, own and operate hydrogen plants. This trend is projected to produce double- digit growth in the merchant hydrogen market. One significant problem with hydrogen as a commodity is storage and transportation. Generally hydrogen production is co-located with facilities using hydrogen, ammonia

50

plants, oil refineries, etc. Hydrogen can be transported in pipelines, but normal natural gas pipelines require modification in terms of larger pumps and special pipe treatments. The most common way to transport hydrogen appears to be via tanker trailer in the form of liquid hydrogen. Electricity Historically, demand for electricity has been related to economic growth; that positive relationship is expected to continue, but the exact relationship is uncertain. Electricity consumption is projected to increase in all end-user sectors. The highest growth rate is projected for the commercial sector, at 2.2 percent per year from 2002 to 2025, compared with 1.6 per year for industrial and 1.4 percent per year for residential electricity demand. Driven by summer peaks, the periodicity of residential demand increases the peak to average load ratio for load-serving entities, which rely on quick-starting turbines or internal combustion units to meet peak demand. The projected growth in commercial and industrial electricity demand from 2002 to 2025 will require significant additions to baseload generating capacities. In the mid to late 1990’s many regions of the country needed or were close to needing new electricity capacity in order to meet consumer requirements reliably. In 2000 and 2001, higher wholesale electricity prices sent strong signals to power plant developers that supplies were tightening, and they embarked on a dramatic building campaign. More recently, however, developers have reported that they are delaying or canceling planned plants. New additions slowed in 2003, and that trend is expected to continue in the near term. Although recent capacity additions are expected to meet near-term needs for electricity generation, more capacity will be needed in the longer-term as electricity use grows and older, inefficient plants are retired. With growing demand after 2010, 356 gigwatts of new generating capacity are projected be needed by 2025. Average U.S. electricity prices, in real 2002 dollars, are expected to decline by 8 percent, from 7.2 cents per kilowatthour in 2002 to 6.6 cents in 2008, and to remain stable until 2011. From 2011 they are projected to increase gradually to 6.9 cents per kilowatthour in 2025. Transmission prices are expected to increase at an average annual rate of 0.9 percent due to increased investment needed to meet projected growth in electricity demand. Transmission may be of particular concern in Wyoming since transmission capacities are already tight. Carbon Dioxide (CO2) Although carbon dioxide is generally though of as a waste material, it does have commercial applications. Environmental concerns regarding CO2 emissions have lead to a number of proposals to inject CO2 into depleted oil and gas wells to avoid venting into the atmosphere. For injecting CO2 into deep wells, companies could receive a fee paid by other companies who are interested in obtaining CO2 exchange

51

credits for their production activities. CO2 also has a potential use in enhanced oil and gas recovery processes. As a result, the CO2 production from the proposed facility could have a commercial value. Carbon dioxide emissions from energy use are projected to increase on average by 1.5 percent per year from 2002 to 2025. Emissions per capita are projected to grow by 0.7 percent per year from 2002 to 2025. The use of fossil fuels in the electric power industry accounted for 39 percent of total energy-related carbon dioxide emissions in 2002, and that share is projected to increase to 41 percent in 2025. Coal is projected to account for 55 percent of the power industry’s electricity generation in 2025 and 84 percent of the electricity-related carbon dioxide emissions. Please refer to Section IX. Carbon Sequestration Considerations for additional information. Natural Gas (Methane) Total natural gas consumption is expected to increase by an average of from 1.3 to 2.2 percent per year between 2002 and 2025. Demand by electricity generators are expected to account for 29 percent of total end-use natural gas consumption in 2025, as compared with 27 percent in 2002. Demand growth is also expected in the residential, commercial, industrial, and transportation sectors. As a result of technological improvements and rising natural gas prices, natural gas production from unconventional sources (tight sands, shale, and coalbed methane) is projected to increase more rapidly than conventional production. The largest increase in the lower 48 onshore natural gas production is projected to come from the Rocky Mountain region, predominately from the large volume of unconventional resources located in the region. Net imports of natural gas are expected to make up the difference between U.S. production and consumption. Imports are expected to be competitively priced with domestic sources. Supplies of natural gas from overseas sources, imported through U.S. liquid natural gas (LNG) terminals, account for most of the projected increase in net imports of natural gas. When planned expansions at the four existing terminals are completed, new LNG terminals are project to start coming into operation in 2007. Average lower 48 wellhead natural gas prices are projected to decline from 2003 levels to $3.25 to $3.58 per thousand cubic feet (2002 dollars) in 2010 and then increase to $3.80 to $5.10 per thousand cubic feet (2002 dollars) in 2025. Low Sulfur Diesel The Final Rulemaking on Heavy-Duty Engine and Vehicle Standards and Highway Diesel Sulfur Control Requirements was signed by President Clinton in December 2000. The purpose of the Ultra-Low-Sulfur Diesel Rule is to reduce emissions of nitrogen oxides and particulate mater from heavy-duty highway engines and vehicles that use diesel fuel. The new rule requires refiners and importers to produce highway

52

diesel meeting a 15 parts per million maximum requirements, starting June 1, 2006. However, pipelines are expected to require refiners to provide diesel fuel with an even lower sulfur content, somewhat below 10 parts per million, in order to compensate for contamination from higher sulfur products in the system and to provide tolerance for testing. Diesel meeting the new specifications will be required at terminals by July 15, 2006, and at retail stations and wholesalers by September 1, 2006. Under a “temporary compliance option” (phase-in),up to 20 percent of highway diesel fuel produced may continue to meet the current 500 part per million sulfur limit though May 2010. The remaining 80 percent of highway diesel fuel produced must meet the new 15 parts per million maximum. Whether there will be adequate supplies of diesel fuel as the new standard becomes effective is a key question. While there is much uncertainty, the possibility of tight diesel markets exists when the Ultra-Low-Sulfur Diesel Rule is implemented. If supplies fall short of demand, sharp price increases would likely occur to balance supply and demand. Current projections are for the consumption of distillate fuels, such as diesel, to increase by 2.0 million barrels per day from 2002 to 2025. An even greater percentage increase is projected for diesel fuel, as a larger portion of total distillate supply is used for diesel production and less is used in other sectors. From 1994 to 2000 the price of low-sulfur diesel has ranged from $0.565 to $1.014 per gallon. This compares to $0.437 cents to $0.875 per gallon for high-sulfur diesel during the same time period. In 2003, the average for low-sulfur diesel was $1.017 versus $0.869 for high-sulfur diesel. Thus there appears to be a price premium associated with low-sulfur diesel and this premium is likely to increase with the implementation of the Ultra-Low-Sulfur Rule. XI. TRANSPORTATION CONSIDERATIONS

Highways and Roads

The City of Douglas and Converse County can benefit from its direct access to the Interstate Highway System through Interstate 25 for construction component trucking and products truck transport. Interstate 25 serves Casper and Natrona County also which enables substantial commuting that may be needed for the labor force, especially during the construction phase, and easy commuting to the Rocky Mountain Oilfield Testing Center (RMOTC). State Highway 59 provides road transportation through Bill with the Powder River Basin area and intersects the Union Pacific Railroad and Burlington Northern Santa Fe Railroad tracks in 2 places. State Highways 93 and 95 connect Douglas and Glenrock and also intersect the Burlington Northern Santa Fe Railroad tracks in 2 places. There are numerous county unpaved roads in the county connecting various homesteads, agriculture operations, and oil and gas operations.

53

Rail

Both Union Pacific Railroad (UP) and Burlington Northern Santa Fe Railroad (BNSF) own, operate, and share rail tracks in the Converse County area running north and south and east and west. Powder River Basin coal is their primary load. The Bureau of Land Management estimates that in 2003, approximately 28,000 trains shipped coal from the Powder River Basin. This is an average of about 76 coal trains a day caring an average of 13,000 tons. UP estimates that it runs between 50 and 60 coal trains a day traveling to and from the basin. Its largest coal customers are Kennecott Energy Company, Peabody Coal, Arch Mineral Corporation, and Cyprus Amax. BNSF estimates that Powder River Basin Coal accounts for over 85% of the coal trains originated by them. In 1970, BNSF hauled three million tons of coal from the Powder River Basin; in 1980, 100 million tons and in 2001, more than 230 million tons. BNSF serves all 23 operating mines in the Powder River Basin. BNSF has indicated that it has the capacity to load 55 coal unit trains (117 cars) per day in the Powder River Basin, seven days a week, 365 days a year. Company principals would need to talk direct with the railroad companies to determine the feasibility of accessing the tracks and agreeing on the rates.

Transmission

Electrical transmission has become a primary concern to policy makers and in some cases, a barrier to new power generation transport. There are numerous reasons as to why this has happened and many groups are now organized to resolve them. Steve Ellenbecker, energy advisor to the Governor and former Wyoming Public Service Commission chairman, has represented the state for at least 6 years on many of the groups working on the issue. When a project for Douglas and Converse County has been selected to be pursued, Steve should be consulted with to provide advice on the latest developments regarding transmission. General agreement has been reached that new transmission lines are needed to supply the major user areas in the nation. The state’s new Infrastructure Authority may become one of the financial tools needed to encourage new transmission lines in the state. The Western Interstate Energy Board and the Federal Energy Regulatory Commission (FERC) can also be of assistance in providing guidance on transmission issues. Another source for guidance on transmission issues is a report commissioned by the Western Governors’ Association entitled Conceptual Transmission Plans for the West. In addition to this main report, the Western Governors also developed a white paper exploring transmission financing options and have initiated protocol among the states for the collaborative review of proposed interstate transmission lines.

High Plains Transmission, LLC is proposing to construct a new merchant line from Glenrock to Utah. The proposal calls for a dual 345Kv line that will have a total capacity of approximately 2,000 megawatts. While other components of the original proposal have been delayed, this portion is still moving forward and may have potential to use power generation from nearby sources for its load.

54

There are existing transmission lines in Converse County. In addition to discussions with the line owners on load capacity, the potential arises for discussions on right-of-way easements for other uses through negotiated terms.

Pipeline

Pipeline capacity in Wyoming for the different commodities has needed to be expanded for years in order to accommodate increased production. In addition to the 2003 completion of the Kern River loop to the west, there are 2 new pipelines proposed for the eastern side of the state with one receiving FERC approval in February 2004. A new Anadarko CO2 pipeline to the Salt Creek field is also complete. The state’s Pipeline Authority has renewed authority and support to encourage pipeline development. Discussions should be initiated with pipeline owners to discuss line capacity and potential right-of-way sharing.

The following map illustrates the different modes of transportation in Converse County to allow a discussion among local decision-makers on the best location alternatives based on this critical component.

55

56

XII. RESEARCH AND ACADEMIC CONSIDERATIONS As alluded to in previous sections of this study, collaborative research on CO2 sequestration, enhanced oil and gas recovery, and other issues associated with coal-based value added processes is currently underway and being tested near Douglas. The Rocky Mountain Oilfield Testing Center (RMOTC) research on greenhouse emissions sequestration is in collaboration with over 15 consortium members and endorsements by 14 entities with 11 of those entities doing business in the area in and around Converse County. The University of Wyoming located in Laramie, Wyoming, only 136 miles from Douglas, hosts the Institute for Energy Research who is spearheading the state’s newly funded initiative on enhanced oil recovery. The Institute also operates through collaborative partnerships which includes 17 industrial sponsors and 11 academic affiliates from around the world. Western Research Institute, also located in Laramie with affiliation to the University of Wyoming, has numerous research and demonstration projects impacting coal-based value added processes in collaboration with governmental and private sector entities. The collaborative efforts of these institutions continue to draw upon the Rocky Mountain area for researchers, expertise, and pilot projects. Douglas is well-located to participate in many of those projects. XVIII. FINDINGS AND CONCLUSIONS The two overriding precepts of successful economic development are timing and location. In evaluating the feasibility of establishing coal-based industrial development in Douglas, Wyoming and the surrounding area, we believe that the City of Douglas and the Project Steering Committee have captured the former and possess the later. The timing for analyzing the area’s capacity and ability to successfully enter the energy and coal-based value added industrial arena is optimum. Technological advances in processing by-products of coal gasification have not only created emerging markets but have created a national resolve to increase production of new fuels from old sources while turning the once historical production waste into marketable products. Many variables come into play when determining a suitable location for the coal-based value added facilities and energy plants of the future. Open space, environmental compatibility, transportation and accessibility, distance and access to coal, workforce availability, and community support are just a few of the factors that can and do influence siting locations. Douglas and the surrounding area possess all of these positive characteristics making it uniquely poised to be competitive in establishing itself as a coal-based value added energy center. We present the following findings and conclusions, which taken as a whole, indicate that Douglas, Wyoming and the surrounding area have the requisite portfolio to successfully enter into and be competitive in coal-based industrial development:

57

1. Douglas is within 150 miles or less of ample long-term supplies of low cost, low sulfur Powder River Basin coal.

2. The current transportation and transmission infrastructure to import the coal

to the site and export the product to market needs to be expanded; however, the opportunity for expansion is available.

3. Current analysis suggests that environmental factors such as air quality,

water quality, wildlife, and cultural considerations should not be problematic if these components are addressed upfront in the process.

4. There are several areas in Converse County near Douglas that appear to be

favorable for siting a project of this type and magnitude. The area between Douglas and Glenrock, north of the North Platte River, appears to be especially favorable relative to air quality permitting because of its distance from the Wind Cave National Park receptor site.

5. The current infrastructure of the City of Douglas and the surrounding area is

adequate for an increase in population which will emanate from construction and operation of coal-based industrial development.

6. There is a skilled labor pool available within a two-county area at reasonable

costs for both the construction and operational phases of a project.

7. Current housing availability is adequate for the workforce and the opportunity for expanded housing in the two-county area is excellent.

8. Existing school capacity is adequate and can accommodate an influx of

students without dramatically altering the current favorable low teacher to pupil ratio.

9. New State of Wyoming financial tools are available for both infrastructure

and business needs.

10. The current favorable low state tax structure has been enhanced by the recent signing into law of a new state tax incentive exempting sales and use taxes on equipment used in manufacturing.

11. New and expanded research and pilot project testing is being conducted on

carbon dioxide sequestration and enhanced oil recovery that can be implemented in Converse County.

12. New and expanded research and demonstration projects are being conducted

on hydrogen-based fuel solutions and other by-products of coal-based value added processing which can be accomplished in Douglas or the surrounding area to provide markets for the by-product.

58

13. Other entities are working towards similar goals within the community,

county, and state which encourage and foster partnerships to successfully complete a project of this magnitude and type.

14. It is recommended that in order to maintain the momentum of timing and to

capitalize on the advantage of location that the City of Douglas and the Project Steering Committee consider the following:

• The City of Douglas should actively pursue this project and should

schedule strategic meetings with decision-makers at the state and federal levels.

• The City of Douglas should also schedule meetings with potential

industry partners to assist the City in realizing its goals.

• The City of Douglas should consider conducting a Site Selection Analysis further narrowing the potential sites for siting of a facility of this type and magnitude.

• Once the sites have been narrowed down, a Situational Analysis should

be conducted for each site assessing its potential to successfully be permitted, taking into consideration all of the factors that would need to be addressed in environmental analyses and permitting requirements.

59

SOURCES AND REFERENCES ALCHEMIX Corporation. 2002. Bridge to the Hydrogen Economy. Available: http://www.alchemix.us Accessed Feb. 28, 2004. Anon. 2002. Briefing Book, Congressional Staff Trip August 26 – 28, 2002. Powder River, Casper to Cody. Anon. 1998. Burlington Northern Santa Fe Railway, Coal Map. Burlington Northern Santa Fe Railway, Fort Worth, Tx. Anon. 2003. Federal Register. Endangered and Threatened Wildlife and Plants; Designation of Critical Habitat for the Preble’s Meadow Jumping Mouse ( Zapus hudsonius preblei) ; Final Rule. Government Printing Office, Washington D.C. 48 pp. Anon. 2000. System Map. Burlington Northern Santa Fe Railway, Fort Worth Tx. Blair, N. (ed). 1978. The Mule Deer of Wyoming. Wyoming Game and Fish Department, Cheyenne Wy. 154 pp. Bureau of Land Management. 2004. Antelope Hunt Areas within Casper Field Office. Available: http://www/wy.blm.gov/cfo/graphics/antehunt-640.jpg Accessed March 14, 2004. Bureau of Land Management. 2004. Elk Hunt Areas within Casper Field Office. Available: http://www.wy.blm.gov/cfo/graphics/elkhunt-640.jpg Accessed March 14, 2004. Bureau of Land Management. 2004. Deer Hunt Areas within Casper Field Office. Available: http://www.wy.blm.gov/cfo/graphics/deerhunt-640.jpg Accessed March 14, 2004. Bureau of Land Management. 2003. Wyoming Annual Report. Available: http://www.wy.blm.gov/Information/annualreports/2003.htm#energy Accessed March 10, 2004. Bureau of Land Management. 2004. Wyoming Casper Field Office NEPA Register. Available: http://www.wy.blm.gov/nepa/logs/c_nepalog04.html Accessed February 2, 2004. Bureau of Land Management. 2004. Wyoming Public Land Sites Southeast Wyoming. Available: http://www.publiclands.org/html/explore/quadrant_map.php?quad=wy_q17Accessed March 14, 2004.

60

Burlington Northern Sante Fe Railroad. 2003. Markets. Available: http://www.bnsf.com/markets.html Accessed: March 11, 2004. Carbon Sequestration: Geological Means. 2002. Geological Carbon Sequestration. Available: http://www.ieronline.org/SlideShows/CarbonSeq-IER_Release Accessed Feb. 28, 2004. Chicago Climate Exchange. 2004. website reviewed. Available: http://www.chicagoclimatex.com Accessed: Feb. 28, 2004. De Bruin R. R. Lyman and L. Cook. 2000. Coal Bed Methane in Wyoming. Information Pamphlet No. 7. Wyoming State Geological Survey, Laramie, Wy. 2 pp. Institute for Energy Research. 2004. Enhanced Oil Recovery. Available: http://www.ieronline.org/research3.asp Accessed Feb. 28, 2004. Institute for Energy Research. 2004. Sponsors. Available: http://www.ieronline.org/sponsors.asp Accessed Feb. 16, 2004. Market Research Center. 2004. Research Report. University of Wyoming, Laramie, Wyoming. February 26, 2004. Northeast Wyoming Economic Development Council . 2004. Wyoming. Available: http://www.newedc.net/converse/Default.htm Accessed March 14, 2004. Northeast Wyoming Economic Development Council. Welcome to Northeast Wyoming – Converse County. Available http://www.newedc.net/default.htm. Accessed February 13, 2004. Oakleaf B. A. Cerovoski and B. Luce. 1996. Nongame Bird and Mammal Plan. Wyoming Game and Fish Department, Cheyenne Wy. 183 pp. Planning Information Corporation. 1997. Request for Waiver of Permit Application for the Two Elk Power Plant. Submitted by Two Elk Generation Partners, Limited Partnership. Submitted to Wyoming Department of Environmental Quality, Industrial Siting Division, February 1997. Rocky Mountain Oilfield Testing Center. 2003. Regional Carbon Sequestration Partnership Formed. Available: http://www.rmotc.com/Today/Newsletter.html Accessed Feb. 28, 2004. Sundstrom C. W. Hepworth and K. Diem. 1973. Abundance, Distribution and Food Habits of the Pronghorn. Wildlife Technical Report No. 12, Wyoming Game and Fish Department, Cheyenne Wy. 61 pp.

61

The Energy Foundation, The Hewlett Foundation. 2003. The Last Straw – Water Use by Power Plants in the Arid West. Hewlett Foundation Energy Series. 17 pp. The Innovation Group. Chemical Profiles – Hydrogen. Available: http://www.the-innovation-group.com/ChenProfiles/Hydrogen.htm. Accessed March 15, 2004. Union Pacific Railroad. 2003. Services and Commodities. Available: http://www.uprr.com/aboutup/usguide/p-usa-wy.shtml Accessed March 10, 2004. U.S. Department of Commerce. United States 2000 Census. Available: http://www.census.gov/. Accessed February 10, 2004. U.S. Department of Energy. Energy Sources – Hydrogen. Available: http://www.energy.gov/engine/content.do. Accessed March 9, 2004, March 16, 2004. U.S. Department of Energy. 2004. Office of Fossil Energy – Gasification. Available: http://fossil.energy.gov/programs/powersystems/gasification Accessed March 10, 2004. U.S. Department of Energy. 2004. Office of Fossil Energy. March, 2004 Report on FutureGen. Available: http://fossil.energy.gov/programs/powersystems/futuregen/futuregen_report_march_04.pdf Accessed March 10, 2004. U.S. Department of Energy. 2003. Prices and Trends. Available: http://www.energy.gov/engine/content.do?BT_CODE=PRICESTRENDS Accessed March 9, 2004. U.S. Energy Information Administration. Annual Energy Outlook 2004 with Projections to 2025. Available http://www.eia.doe.gov/oiaf/aeo/. Accessed March 15, 2004. U. S. Fish and Wildlife Service. 2004. Endangered Species Program. Species in Region 6. Available: http://mountain-prairie.fws.gov/endspp/species_list.htm Accessed March 14, 2004. U. S. Fish and Wildlife Service. Fact Sheet. 2004. Available: http://mountain-prairie.fws.gov/preble/mouse_factsheet.htm Accessed March 14, 2004. U.S. Fish and Wildlife Service. 2004. Federally Listed and Proposed (P), Endangered (E), Threatened (T), Experimental (X), and Candidate (C) Species in Wyoming By County. Available: http://mountain_prairie.fws.gov/endspp/CountyLists/WYOMING082003.htmAccessed March 14, 2004.

62

U.S. Fish and Wildlife Service. 2004. Preble’s Meadow Jumping Mouse. Available: http://mountain-prairie.fws.gov/preble/ Accessed March 14, 2004. United States Forest Service. 2004. Medicine Bow National Forest Projects and Plans. Available: http://www.fs.fed.us/r2/mbr/projects/ Accessed March 14, 2004. Water Resource Data System. 2004. Climatological Data. Available: http://www.wrds.uwyo.edu Accessed March 10, 2004. Western Air Partnership. 2002. WRAP Class 1 Areas. Available: http://www.wrapair.org Accessed March 15, 2004. Western Governors’ Association. 2001. Conceptual Plans for Electricity Transmission in the West- A Report to the Western Governors Association. Denver Co. 58 pp. Wyoming Business Council. Site Selection Center. Available http://www.wyomingbusiness.org/home/index.cfm. Accessed February 13, 2004, March 10, 2004. Wyoming Department of Employment. Economic and Administrative Services. Available http://wydoe.state.wy.us. Accessed February 12, 2004. Wyoming Department of Employment. Employment Tax. Available http://wydoe.state.wy.us. Accessed February 12, 2004. Wyoming Department of Employment. Unemployment Insurance. Available http://wydoe.state.wy.us. Accessed February 12, 2004. Wyoming Game and Fish Department. 2002 Harvest Reports. 2002. Available: http://www.gf.state.wy.us/wildlife/hunting/stats/harvest/2002/index.aspAccessed February 11, 2004. Wyoming Game and Fish Department. 2001. Strategic Habitat Plan. Available: http://www.gf.state.wy.us/wildlife/habitat/reports/strategic/2001/index.aspAccessed February 11, 2004. Wyoming Geologic Survey. 2004. On-line Data Sources Available from the Wyoming Geologic Survey. Available: http://www.wsgweb.uwyo.edu/online.aspAccessed February 13, 2004, March 8, 2004. Wyoming Geologic Survey. 2003. Coal Section. Available: http://www.wsgsweb.uwyo.edu/Coal/ Accessed March 8, 2004. Wyoming Mining Association. 2004. Wyoming Coal. Available: http://wma-minelife.com/coalhome.html Accessed February 13, 2004.

63

Wyoming Natural Diversity Data Base. 2004. WYNDD Species of Concern. Available: http://www.uwadmnweb-uwyo.edu/wyndd/default.htm Accessed February 17, 2004. Wyoming State Historical Preservation Office. 2004. Emigrant Trails. Available: http://wyoshpo.state.wy.us/trailsdemo/index.htm Accessed Jan. 22, 2004. Wyoming State Parks and Historic Sites. 2004. History of Fort Fetterman. Available: http://wyoparks.state.wy.us/FETTER.htm. Accessed March 14, 2004. Wyoming State Legislature. 2004. Final Action on Bills. Available: http://legisweb.state.wy.us/ Accessed March 15, 2004.