$10M Grant to coal plant on hot seat

02/27/2005

Tom Meersman, Star Tribune
February 27, 2005

A key legislator on energy issues said she will try to repeal the law that allowed a state commission to award $10 million from a renewable energy fund to a proposed coal plant in northeastern Minnesota.

Sen. Ellen Anderson, DFL-St. Paul, chairwoman of the Senate Jobs, Energy and Community Development committee, said she will offer a bill this week to nullify the grant by repealing the law retroactively.

“We need to save those funds for what they were intended for—wind, biomass, solar and hydrogen projects,” she said.

Rep. Frank Hornstein, DFL-Minneapolis, will offer a companion bill in the House.

Anderson said that she and other legislators are upset that Excelsior Energy Inc. of Minnetonka will receive $2 million a year for five years from the fund under decision by the Minnesota Public Utilities Commission on Feb. 3. The company has not received any of the money yet.

It proposes to build a pair of 530-megawatt power plants at a former taconite plant in Hoyt Lakes, using new technology that gasifies coal, removes many pollutants and burns the gas to produce electricity.

Anderson said that while the technology may have promise, there’s plenty of federal money for such projects, and the Renewable Development Fund should not be used for coal-fueled plants. The fund was established in 1994 to provide seed money for research, development of various renewable energy technologies and to pay for demonstration projects such as building wind generators on school campuses or renovating small hydroelectric plants.

Under state law, Xcel Energy is required to provide $16 million annually to the fund, which it collects from ratepayers.

Sen. David Tomassoni, DFL-Chisholm, said he will oppose any effort to block the $10 million grant to Excelsior. Tomassoni sponsored provisions in the 2003 energy bill that allowed the coal gasification plant to qualify as an “innovative energy project” and become eligible for renewable energy funds.

“This type of technology is exactly what the fund is trying to have happen in Minnesota, which is to clean up the air and clean up the water as well as provide reliable energy sources,” Tomassoni said. The plant would emit far less mercury, sulfur dioxide and other pollutants than traditional coal-burning plants, he said.

To receive the $10 million grant from the Renewable Development Fund, Excelsior competed with more than 200 other projects in the latest funding cycle. The five-member advisory board that manages the fund chose 28 proposals for $26.5 million in awards. It did not recommend the coal plant because an independent consultant had ranked it low compared to other proposals. The Public Utilities Commission, which has the final say, approved the Excelsior grant in addition to the recommended proposals.

Michael Noble, executive director of Minnesotans for an Energy Efficient Economy, said that just because Excelsior was eligible for a grant did not mean that it was entitled to the money. Noble said his organization is studying the commission’s final order, issued Wednesday, to determine whether to appeal it.

Tom Micheletti, Excelsior’s co-president, said that the commission made a sound decision, and that he was disappointed that Anderson will try to repeal the law.

Micheletti said that coal gasification is far better for the environment and the economy than building traditional coal plants. “Legislators didn’t support this in 2003 because they loved coal, but because they knew that we’d have to add significant electric generation,” he said. “To make renewables our only effort is a mistake and it’s short-sighted.”

But Anderson said she’s concerned that the purpose of the fund has been obscured by legislative tinkering in 2003.

“The Public Utilities Commission made a mistake in how it interpreted the law,” she said. “But the Legislature made a mistake in passing the law in the first place, so we need to correct that.”