Overview

Resources and Consumption

Indiana has moderate coal reserves in the Illinois basin in the southwestern part of the State but relatively few other energy resources. As one of the Nation’s top corn-producing States, it has major ethanol production potential. Driven by an energy-intensive industrial sector, Indiana’s total and per capita energy consumption are both high. Energy-intensive industries in the State include aluminum, chemicals, glass, metal casting, and steel.

Petroleum

Most of Indiana’s oil-refining capacity is located at the BP Products oil refinery in Whiting, just east of Chicago. The Whiting plant has the largest processing capacity of any refinery outside of the Gulf Coast region. Crude oil is produced in southwestern Indiana, but output is minimal, and the Whiting refinery relies heavily on supply from the Gulf Coast region. In September 2006, BP announced plans to invest $3 billion to reconfigure the refinery to process Canadian heavy crude oil, which is increasingly brought to the U.S. Midwest by pipeline from Alberta, where production from oilsands is expanding rapidly. The smaller Countrymark Cooperative refinery in Mount Vernon produces motor and heating fuels for farm, commercial, and residential use, as well as a high grade of diesel fuel used by farmers.

Indiana’s total petroleum consumption is high, and the State is one of the top consumers of distillate fuels, including diesel, in the country. Conventional motor gasoline is used throughout most of Indiana. However, reformulated motor gasoline blended with ethanol is required in the northwestern corner of the State, and gasoline formulated to reduce emissions that contribute to ozone formation is required near the southeastern border adjacent to Louisville, Kentucky. Indiana currently has two ethanol plants with several more under construction.

Natural Gas

Although output has expanded in recent years, Indiana’s natural gas production remains minimal, and the State’s demand is met by deliveries from several major pipelines that carry natural gas from the U.S. Gulf Coast and western Canada. Natural gas consumption is increasing in Indiana and is being met in part by the Rockies Express Pipeline. In June 2009, a section of the eastern leg of the Rockies Express Pipeline system from Colorado and Wyoming began delivering additional natural gas supply to Indiana. Indiana’s industrial sector uses about half of the natural gas consumed in the State. The residential sector is the next largest consumer; nearly two-thirds of Indiana households use natural gas as their primary energy source for home heating.

Coal, Electricity, and Renewables

Indiana is a moderate producer of coal. Relatively small coal mines are concentrated in the Illinois basin region of southwestern Indiana. Although their combined output typically amounts to roughly 3 percent of total U.S. coal production, these mines supply only about half of State demand. The remainder is brought in by railcar and river barge primarily from Wyoming, West Virginia, and Illinois. Coal is primarily used in Indiana for electricity generation, although large amounts are also used by the industrial sector. Indiana is a leader in the use of coal in coke plants, which serve the State’s steel industry.

Almost all of Indiana’s electricity generation is fueled by coal. Natural gas, the next leading fuel for electricity generation in the State, typically supplies less than 5 percent of the market. Although electricity generated from renewable fuels continues to constitute a very small share of Indiana’s total generation, production rose dramatically in 2008 when the State’s first utility-scale wind project was installed in Benton County. Indiana is a net exporter of electricity, as it produces significantly more than it consumes. Households in Indiana use less electricity than the typical American household, due in part to a heavy reliance on natural gas for home heating during the typically cold winters. Less than one-fourth of Indiana households rely on electricity as their main source of energy for home heating.

Indiana does not have a renewable or alternative energy portfolio standard. However, the State did adopt net metering rules in 2004 for small solar, wind, and hydroelectric projects.