Eastman Chemical Company announced that it has decided to discontinue its Beaumont, Texas, industrial gasification project.

According to the Eastman press release this decision was made due to a number of factors, including high capital costs, the current and foreseen reduced spread between natural gas and oil and petroleum coke prices, and continued uncertainty regarding U.S. energy and environmental public policy. As a result of this decision, the company will recognize a pre-tax non-cash asset impairment charge estimated to be between $150 million-$180 million in the fourth quarter 2009.

The DOE had announced it would begin an Environmental Impact Study (EIS). This was widely considered to be an indication that the DOE had selected Eastman’s TXE gasification project for an offer for a loan guarantee.

Green Rock Energy LLC and Eastman Chemical announced in June 2008 that they would not be participating jointly in the Beaumont industrial gasification project as was originally announced in October 2007. Both companies will pursue separate coal gasification projects. Eastman purchased Green Rock’s 50% share of the Beaumont project and will be the 100% owner and developer. And simutaneously, Green Rock purchased Eastman’s 25% share of the Faustina project.

Eastman is continuing the front end engineering and design (FEED) and expects to close on non-recourse financing late in 2008. Green Rock is continuing with the FEED on the Faustina.

Green Rock in association with U.S. Transcarbon LLC will continue to develop the Faustina Project. The Faustina project is located near Convent, Louisiana and will be a petcoke gasification plant and produce hydrogen and ammonia. Green Rock is a company formed by D.E. Shaw and Goldman Sacks to invest in coal/petcoke gasification projects. Green Rock and Transcarbon are continuing with the front-end engineering and design (FEED).