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The Ultimate CEOs: Anthony F. Earley Jr., DTE Energy

The CEO Power Forum: Not all utility CEOs are created equal...

Fortnightly Magazine - June 2005

in-service date, you didn't qualify. Also, you had to make sure that in fact you weren't just taking this marginal coal and the good coal and just kind of throwing them in together. It actually had to be processed into a new form of fuel. There had to be a chemical change in the fuel. As long as your process met this chemical change test, you qualified. Many people were not meeting the chemical change test. Those were the problems that you saw. Those of us that met all of the requirements are entitled to the tax credit. We have been audited by the IRS and they have signed off on our processes.

Fortnightly The other discussion that has taken place in the financial community in terms of synfuel has been what happens when the synfuel program winds down. How do you make up for those earnings?

Earley In 2007 the tax credits end. Some of the cash will continue to come in into 2008. But the way you can look at it is, about $1.6 to $1.7 billion dollars in cash will have been generated for us between now and 2008. Our business challenge is to take that $1.7 billion dollars in cash and reinvest it in our other businesses so that it generates new cash and new earnings for us in the future.

You ask [about] our mix of businesses. That is our largest. In 2008 it's gone, and something else has to take its place. Probably our second largest line of business now, what we call onsite energy services, are energy services for large energy-intensive customers. It's supplying pulverized coal to steel plants, energy services to auto-manufacturing plants, and the like. Last year we bought the energy facilities at eight Daimler-Chrysler plants and [began] selling them compressed air, chilled water, steam, waste-water treatment services, and the like. The pulp and paper industry-we're starting to get into that. That is an intensive energy industry.

Another area that is one of our significant but smaller lines of business right now, is the area of non-conventional gas production. Non-conventional gas production is the production of gas from generally shale formations or coal formations. We produce natural gas out of what is called the Antrium shale formation located in the northern part of the lower peninsula of Michigan. You can think of it as a rock formation that is like a sponge that has natural gas in it. It's not the traditional natural gas bubble that you might drill for in the Texas Gulf coast.

We think there are significant opportunities in newly discovered shale formations, one of which is called the Barnett shale formation in the Dallas/Ft. Worth area. A number of financial commentators have written it up as the next big producing area for natural gas in the United States. We expect that this is a business that could produce between $25 and $50 million in net income for us in the next five years or so. Right now our non-conventional production is in the $20 million range. We would double