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Big tax break urged for new power plant

Texas firm wants to build $600 million facility in Juab

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A Texas company wants a $20 million sales-tax break to build a massive natural gas-fueled power plant in Juab County.

Dallas-based Panda Energy International proposes to construct the $600 million plant west of Mona. Taylor Cheek, Panda vice president, told state lawmakers Wednesday equipment for the 1,100-megawatt facility would run $300 million to $350 million and without a sales-tax exemption wouldn't be viable.

Panda, one of more than 100 independent and unregulated power producers in the United States, intends to keep most of the electricity in Utah, selling it on the wholesale market to public utilities such as PacifiCorp and the Utah Municipal Power Association, Cheek said. (The 1,100 megawatts could power more than 1 million homes.)

The coal-fired 1,680 megawatt Intermountain Power Project near Delta is Utah's largest electricity generator. Cheek said Panda's gas-fueled plants produce a fraction of the emissions of coal-fired facilities.

Sen. Howard Stephenson, R-Draper, said he intends to ask Gov. Mike Leavitt to let lawmakers consider the tax break during a special session of the Legislature in October. The plant, which would employ about 50 people, would eventually bolster the state's education budget, Stephenson said.

"We get millions of additional tax dollars without additional kids to educate," he said. "That's why this interests me so much."

But with Utah facing a $59 million tax revenue shortfall in the fiscal year ended June 30 and Leavitt asking state agencies to trim 4 percent from their current budgets, legislators would be hard-pressed to give up more income.

"I don't know if financially the state is in a position to do that right now," said House Speaker Marty Stephens, R—Farr West.

The House Republican caucus, though, generally supports the concept of a tax break, which he said would be an extension of the current manufacturing tax exemption.

GOP senators sounded a more wary note.

"We're going to give away $20 million and not get anything back?" wondered Sen. Scott Jenkins, R-Plain City, during a Senate Republican caucus.

Stephenson said the state would make the money back in a couple of years after the plant is built.

Sen. Bill Hickman, R-St. George, urged caution, saying once the state opens the door for one company, others would follow. Sen. Bev Evans, R-Altamont, said lawmakers would need much more information before they could make a decision.

Utah energy officials know little about the Dallas company. "I know of the project but I don't know anything about Panda," said Jeff Burks, director of the state energy office.

Panda is a privately held corporation with plants proposed, under construction or in operation in 11 states, China and Nepal, totaling 16,300 megawatts of capacity. It has a goal of expanding to 26,000 megawatts over the next five years.

Because of the large amounts of capital required to build power plants, Panda secures permits and completes other reconstruction site development on some projects. It then brings in a larger partner to put up most of the equity for construction costs in return for a bigger share of the profits, according to the New York Times.

The 19-year-old company ran into trouble a few years ago building a 100-megawatt coal-fired plant in Luannan, China. Company officials say that they completed the plant on time but that the Chinese have sought to pay just one-third of the agreed-upon amount for electricity, the newspaper said.

Compounding the problem, Panda had mortgaged some of the profits from its existing plants to secure financing for the Luannan project, according to the newspaper.

Cheek said Panda will have to go into debt for 60 percent of the Mona project.

Business development manager David Barlow estimated it would take 16 months to obtain a host of government permits to build and another 18 months for actual construction, during which it would employ 1,000 workers.

Panda intends to buy natural gas from Questar and ship it to the site via a pipeline the gas company is proposing to build in central Utah. Curt Burnett, Questar vice president for public affairs, said the company has told Panda it has the capacity to meet its needs but has not entered into contract talks.

E-mail: romboy@desnews.com