By Nick Schneider CONSTRUCTION UNDER WAY: Duke Energy's Edwardsport IGCC Station manager Jim Stulz (left) points to the site of the new $2 billion plant for Gov. Mitch Daniels. The governor visited the site Monday morning to help Duke Energy officials celebrate the start of construction.

The 630 megawatt plant is expected to be operational by 2012.

"Thank you for choosing Indiana. We say this at every business and there have been hundreds of them that have chosen Indiana in the last three years, but there is none of them bigger than this one," Daniels remarked after hopping onto the stage located several hundred yards from where construction on the mammoth plant has already begun.

Architect's concept drawing of the coal gasification facility. The old coal-fired plant is shown in the top center of the photo.

The governor called the northern Knox County plant an innovative break through in clean-coal technology that will allow for the burning of coal mined from the area's Illinois Basin -- which includes large coal reserves in southern Indiana and Illinois.

He estimated the un-mined coal reserves to be in the excess of 57 billion tons in the state of Indiana.

"We can't get serious about energy until we look at coal," Daniel told the gathering of Duke officials, state and federal officials as well as Knox County governmental representatives. "Clean coal is not a policy preference, it's arithmetic. Anybody who can do third grade math can look at the demand and the needs and know that coal we must be central part of the solution."

Gov. Mitch Daniels addressed a gathering at Duke Energy's coal gasification plant on Monday. By Nick Schneider

He continued, "We say yes to coal, yes to wind power yes to alternative fuels, yes to solar, yes to nuclear. The answer to the energy equation in America is all of the above. Coal, clean coal the way they will produce power here in southwest Indiana is the core of that. I am so proud to come here today. America won't make it. Indiana won't make it without finding a way to use the coal that is beneath our feet."

Daniels pointed out that Hoosiers spend $1 billion a year to buy coal from elsewhere so it can burn it consistent with the Clean Air standards that are in place.

"We're here today saying before very long we're going to take that $1 billion dollars and pay it to Hoosiers and Hoosier workers and keep that dollar in our state and keep it, recalculate it in our economy and that's how you take charge of your economics," Daniels stated.

Duke Energy President and CEO Jim Rogers called the new 630 megawatt plant " a logical win-win for the state of Indiana" because it will use Indiana natural resources and provide jobs both during construction and after 2012 when it is operational. By Nick Schneider

The Edwardsport plant will use "integrated gasification combined cycle technology," a coal gasification system to convert coal into a synthesis gas (syngas). The syngas is processed to remove sulfur, mercury and particulates before being sent to a traditional combined cycle power plant. The plant uses two combustion turbines and a steam turbine to efficiently produce electricity.

The new plant will replace four older, less efficient generating units capable of generating approximately 160 megawatts at the Edwardsport site.

The new plant will produce 10 times as much power as the existing plant at Edwardsport, yet it will emit less sulfur dioxide, nitrogen oxide and mercury than the plant it replaces. Due to the plant's superior efficiency, it also will emit 45 percent less carbon dioxide per megawatt-hour than the existing facility, according to Duke officials.

Duke will retire the existing plant -- with coal and oil units built between 1944 and 1951 -- upon completion of the new facility. The plant was the first coal-fired electrical generation plant in the state, according to Jim Stanley, president, Duke Energy Indiana.

Daniels referred to the state's lead role in "green" energy development -- with the world's largest biodiesel plant and second biggest wind farm in the country.

The Edwardsport plant will add to Indiana being "ahead of the game" in developing alternative energy sources, he said.

"We as a state and a nation will not be serious about our energy future if we are not deadly serious about coal and maximizing its possibilities, Daniels said. "Doing so in a way that is highly sensitive to the environment that we will leave for future generations."

Daniels stressed, "The eyes of the world are on this place, knowing there is a place called Edwardsport and Knox County somewhere out here in Indiana where people are prepared not to be hostage to foreign energy, not prepared to simply see a better living standard for future generations slip from our grasp. We have found a perfect place to run affordable energy right here."

An average of 800 to 900 construction workers over a three-year period, with a peak work force of approximately 2,000, will be needed.

Ongoing plant operations will employ about 100 people after completion.

The plant will cost approximately $2 billion to construct. That cost will be offset by more than $460 million in future local, state and federal tax incentives. The plant will result in an average electric rate increase of approximately 16 percent phased in from 2008 through 2012.

The Edwardsport project also shows strong potential for the future addition of carbon capture and storage technology -- one of the most promising solutions to how to address climate change while still using coal to produce electricity, according to Duke President and CEO Jim Rogers.

The technology could remove carbon dioxide from coal during the syngas conversion process and then store or sequester it deep underground in geologic formations. Duke Energy will be filing with the Indiana Utility Regulatory Commission plans for a carbon capture and sequestration study of a portion of the plant's carbon emissions. If it proves to be feasible, carbon dioxide capture and storage equipment could be added to the plant, he said.

Duke Energy will receive approximately $1 million in federal funds to study the permanent storage of carbon dioxide from the plant near the site.

The U.S. Department of Energy announced funding in May for a number of projects across the nation to determine if large quantities of carbon can be permanently stored deep underground instead of being released into the atmosphere.

Rogers also lauded the efforts of his Duke Energy team and Gov. Daniels that have worked for the past four years to bring the plant from an idea to reality.

"It's a giant leap for us. We are working here in Indiana in the heartland of our country -- ensuring a cleaner and brighter future for our children and their grandchildren. Gov. Daniels you made this leap possible. Thank you for stepping up and giving us wonderful support. Thank you for your courage and conviction and your vision for this project and believing that we in this country have the capability to transform our future. Rather than whining about where we are, we are actually doing something about it here and now and in Indiana," Rogers said. "It's my judgment that this project will be the tipping point of clean coal technology in our nation and in the world. What we can do here will be replicated over and over in Canada, Mexico, China, India and Australia. You here in Knox County can be proud because you are the epicenter for clean coal technology."