2014

Lake Charles Clean Energy Announces Contracts with BP, Air Products and Denbury; Advances First-in-the-Nation Project with State-of-the-Art Gasification for Clean Fuels $2.5 Billion Investment in Louisiana's Economy Would Create up to 1,500 Construction Jobs, Provide Clean Fuels for State's Petrochemical Industry and Use Carbon Dioxide to Boost Domestic Oil Production

LAKE CHARLES, La., Oct. 29, 2012 /PRNewswire/ -- Lake Charles Clean Energy (LCCE), LLC announced today that it has secured major long-term commercial offtake contracts with BP Products North America Inc., Air Products and Chemicals, Inc. and Denbury Onshore LLC, a subsidiary of Denbury Resources Inc., for the Lake Charles Clean Energy project located at the Port of Lake Charles, Louisiana. LCCE is a subsidiary of Leucadia Energy, LLC.

Securing long-term commercial offtake contracts is a major milestone, as it enhances Leucadia Energy's ability to seek and obtain necessary third-party financing for the project prior to commencing construction. This project, employing commercially proven gasification technologies to cleanly manufacture industrial products from petroleum coke, would be the first of its kind in the U.S. LCCE is expected to be one of the world's lowest-cost producers of methanol and hydrogen and a low-cost producer of other products used in the chemical and refining industries.  In addition to extraordinary limitations on emissions of Criteria Pollutants, the plant is designed to capture, compress and sell 90 percent of its carbon dioxide ("CO2") production for use in Enhanced Oil Recovery ("EOR") in the US Gulf Coast.

BP Products North America Inc. will purchase the majority of the methanol production and Air Products will purchase all of LCCE's hydrogen and argon and also provide the air separation units to supply the required oxygen for the project. Denbury Onshore LLC will purchase all of the captured CO2.

Thomas E. Mara, President of Leucadia Energy (an indirect wholly owned subsidiary of Leucadia National Corporation) (NYSE: LUK), said: "The commercial offtake contracts with BP and Air Products, together with the existing long-term CO2 contract with Denbury Onshore LLC, are major commercial milestones required to facilitate financing for the project. Having these companies as our customers validates our business model and our vision of bringing a clean fuels facility to Lake Charles. These offtake contracts, along with our success at obtaining all required federal, state, and local permits and approvals, mean the ongoing site work will continue and should facilitate project construction next year. Our current success is a direct result of the ongoing strong support of the Port of Lake Charles, Calcasieu Parish, the Cities of Sulphur and Lake Charles as well as the many local businesses working with LCCE to turn this project into a reality." 

A final investment decision in the project remains subject to third party financing and board approval by Leucadia National Corporation.  As part of its financing efforts, Lake Charles Clean Energy has retained Credit Suisse AG and its affiliates, Citigroup and its affiliates, and Jefferies & Company, Inc. and its affiliates to provide advisory services related to potential placement of project equity.  

The project represents a capital investment of more than $2.5 billion and is expected to provide up to 1,500 construction jobs during the 3-4 year construction period, beginning in 2013. Leucadia Energy will be managing construction of the project. Turner Industries Group, LLC of Baton Rouge, La., will construct the project, and Kellogg, Brown and Root, ("KBR"), will provide design, engineering and procurement services. 

Located on property leased from the Port of Lake Charles ("the Port"), the project site will be adjacent to ship, barge and rail facilities, and the Port will provide logistical services such as storage and loading and unloading of cargoes.  LCCE will acquire petcoke from Koch Carbon, LLC, under a long-term feedstock supply and logistics service agreement, which will amount to 7,000 metric tons of petcoke a day from Gulf Coast refiners. Through this process, LCCE would extract the beneficial energy in petcoke while avoiding harmful emissions and producing no waste product.

After completion, there will be approximately 165 full-time skilled employees (including contract employees) at the clean fuels plant, with competitive wages and benefits for the technical jobs needed to operate and maintain this first-of-its-kind U.S. clean energy plant. Operations and management at the plant will cost approximately $2 billion during its 30-year life. The majority of costs will go to pay local workforces and purchase locally procured materials and services. The project would have a tremendous economic multiplier effect in the surrounding area, through housing demand and services needed for the facility and its employees.

Former United States Senator Bennett Johnston (D-La.), whose Johnston Development Company is a joint venture partner of Lake Charles Clean Energy, said: "Commercial offtake agreements with BP and Air Products demonstrate the strength of the project and the viability of clean energy technologies and investment. Our project is a great demonstration of how government incentives and private enterprise can work together to implement clean energy technologies." 

Jeff Byrne, vice president and general manager, Tonnage Gases for Air Products, said: "We are pleased to be part of this project on both the supply side, as well as receiving product that we can use to serve to our customers.  The hydrogen we receive from LCCE will again demonstrate the value of our Gulf Coast Connection Pipeline.  We can take this hydrogen and supply the vast number of refinery and petrochemical customers on our Texas to Louisiana pipeline.  On the Merchant side of our business, the argon will be a valuable source to our existing and new customers in North America."

William Rase, Executive Director of the Port of Lake Charles, said: "We are very pleased that Lake Charles Clean Energy has reached this important commercial milestone. We fully support the Lake Charles Clean Energy project, which will be an important part of the future of the Port of Lake Charles. We look forward to working with Leucadia Energy to fully implement this clean energy project."

LCCE was awarded $1.56 billion of Gulf Opportunity Zone ("GO Zone") and Hurricane Ike tax-exempt bonds by the Louisiana State Bond Commission. The issuance of these bonds demonstrates the state of Louisiana's strong financial support for the project. The low-cost GO Zone financing provided by the state was a large incentive to develop the project in Lake Charles.

In addition to the state bond financing, the LCCE project is one of three large-scale industrial carbon capture projects that were awarded a Department of Energy ("DOE") grant as part of an effort to capture carbon dioxide from industrial sources for storage or beneficial use. The DOE grant is for approximately $261 million.

As part of the clean fuels aspect of the project, all of the captured CO2, which is expected to equal approximately 4.5 million tons annually, will be sold to Denbury Onshore, LLC for use in its Gulf Coast EOR operations.  Denbury currently produces over 35,000 barrels of oil per day from its Gulf Coast CO2 EOR operations and will use the captured CO2 to further increase this production.  When used in EOR, CO2 is stored in underground oil producing formations.

Phil Rykhoek, President and CEO of Denbury Resources Inc., commented, "Denbury Onshore and its affiliated companies are pleased to see Lake Charles Clean Energy reach another key milestone in the development of this first-of-its-kind domestic project.  The CO2 from the plant would supplement our other Gulf Coast CO2 sources and be used to drive additional growth in our Gulf Coast EOR operations.  The captured CO2 would be transported through the 320-mile Green Pipeline, which was built to move CO2 to Gulf Coast oil fields ideally suited for CO2 EOR from natural sources near Jackson, Mississippi and projects like this one.  From an environmental standpoint, EOR using man-made CO2 results in a net reduction in carbon emissions as the amount of CO2 captured and stored exceeds the amount of CO2 contained in the oil produced.  Also, CO2 EOR allows us to recover oil that would otherwise be stranded in existing domestic oil fields, reducing our country's dependence on foreign oil imports.  As a result, when coupled with our EOR operations, this project is a positive for the environment and for domestic energy supply, a true win-win."

In addition, the project has been awarded a $128 million federal investment tax credit under IRS Section 48B, which was a further indication of the support of the federal government for this clean fuels project.

For more information about the Lake Charles Clean Energy project, please visit: www.LakeCharlesCleanEnergy.com

About Leucadia

Leucadia Energy is an indirect wholly owned subsidiary of Leucadia National Corporation (NYSE: LUK), which is a diversified holding company engaged through its consolidated subsidiaries in a variety of businesses, including beef processing, manufacturing, gaming entertainment, real estate activities, medical product development and winery operations. Leucadia Energy is investigating the development of other domestic projects that would utilize commercially proven gasification technology. For more information about Leucadia National Corporation, please visit www.leucadia.com.

About BP

BP (NYSE: BP) ranks as one of the top five refiners in the U.S., with capacity to process up to 1.5 million barrels of crude oil every day. The company is the nation's second largest producer of oil and gas, a major oil refiner and a leader in alternative energy sources including wind power and biofuels. BP provides enough energy each year to light the entire country. With 23,000 U.S. employees, BP supports nearly a quarter of a million domestic jobs through its business activities. For more information about BP, please visit www.bp.com.

About Air Products

Air Products (NYSE: APD) provides atmospheric, process and specialty gases; performance materials; equipment; and technology. For over 70 years, the company has enabled customers to become more productive, energy efficient and sustainable. More than 20,000 employees in over 50 countries supply innovative solutions to the energy, environment and emerging markets. These include semiconductor materials, refinery hydrogen, coal gasification, natural gas liquefaction, and advanced coatings and adhesives. In fiscal 2012, Air Products had sales approaching $10 billion. For more information, visit www.airproducts.com.

About Denbury

Denbury Resources Inc. (NYSE: DNR) is a growing independent oil and natural gas company. The Company is the largest combined oil and natural gas operator in both Mississippi and Montana, owns the largest reserves of CO2 used for tertiary oil recovery east of the Mississippi River, and holds significant operating acreage in the Rocky Mountain and Gulf Coast regions. The Company's goal is to increase the value of acquired properties through a combination of exploitation, drilling and proven engineering extraction practices, with its most significant emphasis relating to tertiary oil recovery operations. For more information about Denbury, please visit www.denbury.com.

This press release may contain "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Although Leucadia believes any such statement is based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of factors that may cause results to differ, see Leucadia's reports filed with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 and its Annual Report on Form 10-K, as amended, for the year ended December 31, 2011. These forward-looking statements speak only as of the date hereof. Leucadia disclaims any intent or obligation to update these forward-looking statements.

Lake Charles Clean Energy LLC

FACT SHEET:  LAKE CHARLES CLEAN ENERGY LLC
Project Highlights
October 29, 2012

Feedstock 

  • At design, annual usage of approximately 2.4 million tons of petroleum coke or petcoke.
  • Petcoke is an energy-rich waste byproduct produced from refining heavy crude oil, high in sulfur content.
  • 25 percent of world's petcoke is produced within 300 miles of the LCCE site.

Gasification Technology

  • LCCE will use advanced gasification technology to avoid harmful emissions while extracting energy from petcoke. LCCE will cleanly convert the feedstock chemically under high temperature and pressure to create clean synthesis gas with very low emissions.

Methanol, Hydrogen and Byproduct Production

  • LCCE is expected to be one of the world's lowest-cost producers of methanol. Over 1 million metric tons of methanol will be produced each year, with the majority already committed under long-term off-take contracts.
  • All of the hydrogen and argon produced annually will be sold under long-term off-take agreements.
  • Approximately 400 thousand tons of sulfuric acid will be produced annually from the sulfur in the feedstock and is expected to be sold into the industrial market under long-term off-take agreements.

Annual Liquefied Carbon Dioxide (CO2) Production

  • Facility to employ state-of-the-art technology to capture and sell approximately 90 percent of its CO2 for enhanced oil recovery.
  • Approximately 4.5 million tons annually will be sold to Denbury Onshore LLC for use in enhanced oil recovery operations in the Gulf Coast Region (estimated to result in additional domestic oil recovery of 6 million to 9 million barrels.)[1]  

Emissions Performance Highlights

  • As a result of using gasification technology and state-of-the-art controls, permitted emissions will create zero liquid discharge of gasification process water and limited Sulfur Dioxide or Nitrogen Oxides emissions. In addition, 90 percent of the Carbon Dioxide will be captured and used for enhanced oil recovery operations.

Schedule

  • Financial close is expected in 2013 and achieve commercial operations in the second half of 2016.

Clean Air Act Permit Status

The Louisiana Department of Environmental Quality (LDEQ) issued the PSD construction permit and Title V operating permit on June 29, 2012.  For more information, please visit: http://www.deq.louisiana.gov

[1] Assumes a range of 0.5 to 0.64 tons of CO2 per incremental barrel of oil produced which is based on Denbury Resources' estimates for its Gulf Coast CO2 EOR operations.

SOURCE Lake Charles Clean Energy, LLC




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