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Gallagher Pipeline Project

Update to Gallagher Pipeline Project

The Gallagher pipeline project is currently on hold while Duke Energy Indiana pursues regulatory approvals for an alternative option. During the process of exploring conversion of two of Gallagher Station’s four coal-burning units to natural gas, we learned of an opportunity to acquire an interest in Vermillion Generating Station, a gas-fired electric power plant co-owned by the Wabash Valley Power Association and a subsidiary of Duke Energy Ohio. The Vermillion transaction gives us the same or slightly more power generation at a lower cost per kilowatt than converting two of Gallagher’s units to gas. Therefore, with our customers’ interests in mind, we are pursuing this alternative. 

We are, however, preserving the option of converting the Gallagher units to gas. The Federal Energy Regulatory Commission and the Indiana Utility Regulatory Commission must approve the transaction in order for us to acquire part of the Vermillion plant. If, for some reason, we do not receive these regulatory approvals under terms acceptable to us, we have requested approval from the Indiana Utility Regulatory Commission for the Gallagher gas conversion.

If Duke Energy Indiana is successful in getting regulatory approvals for the Vermillion transaction, the company intends to retire two of Gallagher’s units. The remaining two Gallagher units, about half of the station’s generating capacity, would not be affected by this transaction and would continue to operate.

The overriding consideration as we make these decisions is complying with the agreement we have with the EPA in a way that is most economic for our customers. If the Gallagher units are retired, we will work closely with local officials and employees to do what we can to manage the transition.

Key Dates in the Regulatory Process:

  • May 26 – File testimony with Indiana Utility Regulatory Commission requesting approval of plans.
  • Mid-June, 2011—File for Federal Energy Regulatory Commission approval of Vermillion transaction.
  • September 26 – Indiana Utility Regulatory Commission hearings commence.
  • January 1, 2012 – Deadline for notifying the EPA of the company's plans to either retire or convert the two Gallagher units to gas. If the company retires the units, the agreement with the EPA requires us to stop operating the units within 30 days. If we elect to convert the units to natural gas, we must make the necessary infrastructure changes in order to prepare the units to receive natural gas by Dec. 31, 2012.

Project Summary

In December 2009, Duke Energy reached a settlement agreement with the U.S. government and other parties that allows us to continue to operate our Gallagher electric generating plant in New Albany, Ind., while we make changes at the plant to reduce the plant’s emissions.

Those changes could include converting two of the four generating units from coal-burning units to natural gas. The conversion would reduce the plant’s emissions and improve air quality in the region. While a final decision on this conversion is not due until January 1, 2012, we are beginning the process of surveying a route for a possible new pipeline that would bring a sufficient quantity of natural gas to the Gallagher Station.

Duke Energy would need to install approximately 19 miles of 20-inch diameter pipeline to transport natural gas to the station. The pipeline would begin at a new interconnection with Texas Gas near Kosmosdale in Jefferson County, Kentucky. Duke Energy is proposing that the pipeline run west, under the Ohio River, to Harrison County, Ind. The pipeline would then turn north toward the Gallagher Station and would run parallel to the river, using existing utility and roadway corridors wherever possible.