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State approves tax incentives for $193 million Pike County project to turn natural gas into synthetic fuel

Would create 30 full-time jobs paying average hourly wages of $34.16

FRANKFORT, Ky. (Aug. 28, 2014) — Pike County could soon be the location of a $193 million synthetic oil production facility with estimated production of 1,700 barrels a day. Kentucky economic development assistance program  officials in Frankfort today game preliminary approval for $18 million in tax incentives to RCC Big Shoal LLC.

RCC BigShoal is a newly formed company that has developed technology to convert natural gas to synthetic diesel fuel, synthetic base oils and lubricant oils, and synthetic naphtha, according to information presented this morning at the Kentucky Economic Development Finance Authority’s monthly meeting.

The KEDFA board must approve tax incentive packages that private sector companies negotiate with the state Cabinet for Economic Development under its portfolio of programs. Companies lower their future tax bills for state and local taxes if they fulfill commitments to invest in Kentucky and/or hire state residents.

The project would create 30 full-time jobs paying average hourly wages of $34.16, which does not include benefits. Pike County’s most recent unemployment rate was 12.2 percent, much higher than the state average of 7.5 percent. Information presented at today’s KEDFA board meeting did not list a possible start date for the Pike County project.

RCL Chemical Conversion LLC is listed as owning at least 20 percent of RCC Big Shoal, which could receive state tax breaks through the cabinet’s Incentives for Energy Independence Act program, which the General Assembly enacted in 2007. IEIA incents companies that make or sell non-fossil fuel and alternative energy products, including transportation fuel; products created from coal or biomass; and alternative power generation.

David L. Farmer, president and CEO of RCL Chemical, is the principal of RCC Big Shoal, which filed Kentucky papers in mid-February, according to Farmer previously led construction, startup and operation of the world’s largest commercial scale chemical plasma gasification plant at Dow Corning’s Midland, Mich., facility.

According to the website of RCL Chemical Conversion, which is incorporated in Delaware, its gas-to-liquids technology is the “commercial solution for marketing remote U.S. natural gas reserves and the oversupply of ethane.”

It is pursuing modular GTL opportunities for remote and smaller gas fields where scale has been a limiting factor. Estimates are that less than 10 percent of the world’s gas fields are capable of sustaining a 10,000 barrels per day facility, according to RCL Chemical Conversion’s website.

“However, scaling down to a 2,000 bpd production range is estimated to open 70 percent of the world’s gas fields to economic viability,” it states. “Hence, approximately 30 years of energy independence immediately derived from the U.S.A’s newfound and now procurable natural gas reserves.

Eastern Kentucky’s shale gas reserves could fit that scaled-down model.

Kentucky shale gas activity that rose with the development of hydraulic fracturing techniques has fallen off the past few years in favor more easily worked and more productive plays in the Marcellus Shale formation under Pennsylvania, West Virginia and eastern Ohio. In addition to its Devonian Shale assets, Kentucky is on multiple major gas transmission pipeline routes running between the nation’s main energy processing cluster on the Gulf Coast and the prime consumption markets in the Northeast corridor.

The proposed Pike County project meets IEIA statue conditions, according to the state’s Department of Energy Development and Independence, and the University of Kentucky Center for Applied Energy Research. Kentucky’s Department of Revenue reported to KEDFA that RCC Big Shoal is in good standing.

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