Maryland's only facility for manufacturing substitute natural gas has closed, a victim of the plunge in prices for out-of-the-ground methane.
The continuing glut of natural gas, which, coincidentally, drove one of Maryland's biggest gas suppliers into restructuring talks last week, has forced the Baltimore Gas and Electric Co. to shut down the Riverside plant that helped keep many Marylanders' heat on during the natural gas shortages of the late 1970s.
BG&E; said last week that it had hired salvagers to dismantle and sell the multimillion-dollar plant -- even as the utility forecast that demand for clean-burning natural gas would grow in coming years. To prepare for tougher air pollution regulations, BG&E; has proposed installing several new natural gas-powered generators to meet growing summertime electricity demand. BG&E; has even purchased some natural gas vans for its fleet and helped the state buy natural gas-powered buses and cars.
But, energy experts say, the closure of the little-known plant, which turned naphtha into methane, is the latest in a long and often costly string of surrenders in the battle to get profits from man-made gas. Despite subsidies and loans of several billion dollars from the now-disbanded federal alternative fuels program, there are now fewer than a dozen commercial synthetic fuels plants operating nationwide.
And, experts say, the demise of the BG&E; plant, under the shadow of the Key Bridge in Dundalk, illustrates the as-yet-futile search for cost-effective synthetic alternatives to imported fuels.
The problem for the old-style naphtha plants, as well as modern facilities that cook coal to get gas, iseconomics, pure and simple, said Peter Barone, a spokesman for the Chicago-based Gas Research Institute.
The GRI, a not-for-profit research institution for the gas industry, has also given up on research into synthetic fuels because natural gas is expected to be abundant for at least the next 30 years, Mr. Barone said.
"It is kind of hard to sit there and spend money on synfuels when, to the best of our knowledge, there won't be any need for these plants until at least 2020 or 2030," he said.
The Riverside closure will save BG&E; more than $1 million a year, the company claims, but it will also cut a small tie to the company's past.
After all, the corporate ancestor of BG&E;, Rembrandt Peale's Gas Light Company of Baltimore, lighted the nation's first
gaslights with man-made methane in 1816.
It wasn't until decades later,when vast underground deposits of natural gas had been discovered and drilling and transportation technology had been improved, that natural gas was cheap and abundant enough to replace synthetic fuel.
Natural gas is methane that is created by the natural decomposition of plants and animals.
Even as recently as the 1970s, delivery problems and shortages plagued BG&E.;
By 1973, in fact, BG&E;'s supply of gas was so tight that the utility could not add any new customers to the line and was afraid it wouldn't be able to meet the demands of existing customers.
So, the utility decided to start making its own gas again. It spent $46 million building the Riverside plant, using a well-established,though complex, method that relied on then-abundant and cheap naphtha. At Riverside, naphtha, a by-product of oil refining, was converted to gas by heating it to 950 degrees in a chamber with nickel, pure hydrogen and steam.
The plant's 100 workers pumped methane into BG&E;'s lines during the unusually cold and fuel-short winters in the late 1970s. But when Congress deregulated the nation's gas supply in 1978, the supply of natural gas burgeoned and prices fell. By 1982, the Riverside plant began to seem expensive.
Stephen Jones, a gas supply planner for BG&E;, said that the company started paring the costs by running the plant only when absolutely necessary, reducing the inventory of spare parts and reassigning workers. By last year, the plant was running on a skeleton crew of about 25.
Meanwhile, BG&E; was tapping into natural gas pipelines for cheap supplies.
By last year, according to the Riverside plant's manager, Bill Copes, BG&E; realized it couldn't justify keeping the facility open. The security of having its own supply of natural gas just wasn't worth the cost. After all, he said, it was costing BG&E; about $12 to make a unit of gas it could buy for less than $2 on the open market.
Mr. Copes, who was assigned to the plant during its construction 25 years ago, said that he knows the plant is unprofitable, but he will be a little sorry to see the huge metal Tinker Toy-like maze of pipes and smokestacks dismantled and sold.
He and the few remaining workers overseeing the closure of the plant will be reassigned, and it will take at least two years for the site to be readied for a new use, he said.
The winters were tough, with the cold wind whipping across the water and asphalt. But, Mr. Copes pointed to the sweeping view of the bay and the Key Bridge and added, "It was nice to work here in the summer."
The tales of other, more recent, synthetic fuel projects are more dramatic and painful, though the endings are much the same.
After the oil embargoes of the 1970s, the Carter administration established a quasi-governmental corporation that was designed to speed U.S. energy independence by funding synthetic fuel plants in 1980.
But after only four years of operation, the Synfuels Corp. was shut down, having spent more than $2 billion and having funded only six major projects.
Only two of those plants are now operating, said Frank McElroy, a manager of some Department of Energy synfuels projects. And one, the Department of Energy's Great Plains coal gasification plant in Beulah, N.D., is producing gas only because the government allowed it to proceed after it defaulted on $1.5 billion in federal construction loans.
The problem with all of the projects, Mr. McElroy said, was that synthetic fuel plants never were able to cut their costs enough to match low natural gas prices.
As a result, the plants could operate only if they got huge subsidies from the government.
Although a few European countries are going ahead with synfuels projects, "large-scale commercial operations are impeded by the fact that oil and gas are low-priced and available" worldwide, Mr. McElroy said.
Noting that the Synfuels Corp. was established to free the nation from dependence on the politically unstable Mideast, Mr. McElroy said the lack of investment in synthetic fuels may prove troublesome."Whether this is setting us up for another fall, we don't know," he said.
Most energy experts now believe that the synfuels attempts of the 1970s and 1980s were doomed to failure.
When government tries to pick and subsidize "a technology it thinks will be marketable . . . the chances that it will pick the right one are pretty small," explained Henry Lee, an energy specialist who teaches at Harvard University's John F. Kennedy School of Government.
And since natural gas prices are expected to stay low now, the remaining synfuel plants will continue to lose money, and no one will want to invest in alternatives, he said.
The best way to make synthetic fuel plants a good investment would be to raise the price of natural gas until users are forced to start looking for alternatives, he explained. But increasing taxes on fuel, he concedes, "is politically unpalatable."
There are some, though, who say the 1990s will finally see synfuel plants make money.
Destec Energy Inc., a Houston-based company controlled by Dow Chemical, said that although its experimental coal gasification plant in Louisiana couldn't survive without $50 million to $100 million a year in DOE subsidies, it plans to start building unsubsidized commercial gasification plants soon.
Utilities in Indiana and in the Appalachian region have signed contracts to purchase plants that will turn coal into natural gas, then burn the natural gas to run electricity generators, said Marvin Brown, a Destec spokesman.
The utilities think they will be able to make the plants pay, though no one else has yet done so, because they will produce electricity with much less air pollution than most existing power plants, he explained.
The recently toughened Clean Air Act gives utilities financial incentives for reducing emissions.
Having managed to keep government support for their synfuels even during the lean years of the late 1980s, "we feel we're in an excellent position" to benefit from the next synfuels cycle, Mr. Brown said.