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Kentucky Revokes Peabody Coal Grant
FRANKFORT --Gov. Steve Beshear is taking a $400,000 grant back from Peabody Energy Corp. because the company has made no visible progress toward studying the feasibility of a $3 billion coal-to-liquids plant in Western Kentucky.

Former Gov. Ernie Fletcher's administration awarded the grant in May.

Peabody originally told state officials that it might build a $3 billion plant near Sturgis in Union County to convert regional coal into synthetic diesel fuel. But the company submitted no progress reports or invoices for any of the $400,000, said Brad Stone, assistant director for research, development and demonstration at the Governor's Office of Energy Policy.

"It just never took off. The company never showed progress toward their deliverables," Stone said.

Beshear's office notified Peabody of the contract cancellation in January. A legislative committee approved it this week.

Peabody spokeswoman Beth Sutton said the company has agreed to forfeit the grant at this time, with the understanding that it can reapply in the future.

"We're looking to get a better sense of regulatory certainty" from Congress and the state governments regarding coal-powered energy, Sutton said. "We appreciate the state's support of alternative fuels development projects."

Union County Judge-Executive Jody Jenkins said Peabody owns the rights to a lot of coal in his area, so residents had hoped the plant would be built. However, Peabody never said much publicly, not even identifying a specific site where the plant might be located, Jenkins said.

"They've kept it all pretty close to their vest on how much progress they were making, which I guess is because they weren't doing very much," Jenkins said. "We were just waiting and trying to stay positive about it."

The coal-to-liquids project is separate from another Peabody deal, a proposed coal-gasification plant -- also valued at $3 billion -- that could be built in Kentucky.

Kentucky last year awarded up to $250 million in incentives for that plant to Kentucky Syngas LLC, a wholly owned subsidiary of Peabody. Peabody is considering possible sites in Henderson, Union, Ohio, Webster and Muhlenberg counties, where regional coal would be turned into synthetic natural gas.

The coal-gasification proposal is in the early stages, but it appears to be on track, said Catherine Staib, an attorney for the Kentucky Economic Development Cabinet.


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