Governor Fletcher Makes it Official - Peabody Energy, Conocophillips to Evaluate Sites Exclusively in Kentucky

Press Release

Governor Fletcher Makes it Official - Peabody Energy, Conocophillips to Evaluate Sites Exclusively in Kentucky

Monumental $3 billion project paves the way to make Kentucky national leader in alternative fuel industry

Governor Ernie Fletcher today joined Rick Bowen of Peabody Energy in making the highly anticipated announcement that Kentucky Syngas LLC, a wholly owned subsidiary of Peabody Energy Corp., has narrowed its focus exclusively to Kentucky as it evaluates sites for a $3 billion synthetic natural gas facility.

The historic project would result in one of the largest commercial coal-to-natural gas facility in the United States. The announcement today in Louisville follows the preliminary approval of Kentucky Syngas for up to $250 million in inducements by the Kentucky Economic Development Finance Authority under Kentucky's new Incentives for Energy Independence Act.

Governor Fletcher's leadership in developing a comprehensive energy policy for Kentucky successfully resulted in the passage of HB 1, the energy incentive legislation, in the Second Extraordinary Session of the 2007 Kentucky General Assembly. The legislation gives energy companies an incentive to build plants in Kentucky that will convert coal, corn and other products into clean fuels.

"Today marks a historic day in Kentucky's path toward energy security," said Governor Fletcher. "Approval of Kentucky Syngas under Kentucky's new Incentives for Energy Independence Act shows the commonwealth's commitment to becoming a national leader in the alternative fuels industry."

Kentucky Syngas will convert coal and petroleum coke into substitute natural gas, annually producing approximately 50 billion to 70 billion cubic feet of pipeline quality synthetic natural gas from more than 2.5 million tons of Kentucky-sourced coal.

Natural gas demand has grown rapidly in recent years, and development of coal-to-gas projects is gaining increasing interest. The project will use proprietary ConocoPhillips "E-GAS™" technology and will be developed with the capability to capture and store carbon dioxide.

Gasification has been used for the refining, chemical and power industries for more than 50 years. E-GAS™ technology converts coal or petroleum coke into a clean synthesis gas, allowing virtually all impurities to be removed.

"Kentucky is on the nation's leading edge in developing a new, clean alternative fuels industry using its abundant supply of coal to create hundreds of jobs and billions of dollars of investments in the state," said Bowen, Peabody's president of generation and btu conversion. "We appreciate the bipartisan support for our project and the hard work that has taken place to bring us to this important milestone."

The search for a Kentucky site has been narrowed to a five-county region - Henderson, Union, Ohio, Webster and Muhlenberg counties. The final location will be determined following completion of a feasibility study expected next year.

An economic impact study performed by the Cabinet for Economic Development's Office of Research and Information Technology indicates the construction phase alone would have a tremendous effect on Kentucky's economy. The potential one-time direct economic impact of the anticipated 1,200 construction jobs would be approximately $229.1 million.

An estimated 175 direct jobs would be created upon completion of the project, with an additional 375 jobs to be realized related to coal mining operations in the production of coal feedstock.

"The project will create hundreds of jobs and provide extraordinary long-term economic benefits for the citizens of Kentucky," said Governor Fletcher. "Peabody has had a longstanding presence in Kentucky and will continue to be an important partner in achieving energy security within the state."

Peabody Energy (NYSE: BTU) is the world's largest private-sector coal company, with 2006 sales of 248 million tons of coal and $5.3 billion in revenue. Its coal products fuel approximately 10 percent of all U.S. electricity and more than 2 percent of worldwide electricity.

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