Iron Range gasification plant survives challenge in Senate

06/24/2005

Rob Hotakainen,
Star Tribune Washington Bureau Correspondent
June 24, 2005

WASHINGTON, D.C. - The Senate voted Thursday to keep a proposed energy plant on Minnesota’s Iron Range on track, rejecting a plan that would have stripped funding for a new coal-gasification plant near Hoyt Lakes.

On a 76 to 21 vote, the Senate defeated an amendment to its wide-ranging energy bill that would have denied $800 million in loan guarantees for the Minnesota project and similar guarantees for a handful of other projects.

Sen. Ron Wyden, D-Ore., who offered the amendment with Sen. John Sununu, R-N.H., called the loan guarantees “a blank check for boondoggles.” Sununu said the energy bill is too expensive and urged Congress to exercise “just a little bit of restraint” by scrapping taxpayer-subsidized loan guarantees.

“It’s such a terrible precedent, putting taxpayers on the hook for billion-dollar loans to large, successful, private, profitable corporations,” Sununu said.

Sen. Larry Craig, R-Idaho, defended the loan guarantees, saying Congress must provide incentives to help get new technologies off the ground. He said Americans are paying high gas prices partly because Congress hasn’t done enough to increase the national energy supply.

The vote was a victory for Wayzata-based Excelsior Energy’s Mesabi Energy Project. Company officials could not be reached for comment. According to the company’s website, construction on the project is set to begin next year.

Bipartisan backing

Minnesota Sens. Mark Dayton, a Democrat, and Norm Coleman, a Republican, both voted against the amendment.

“There’s a lot of things that this energy bill represents, but to me it fundamentally represents jobs, jobs and jobs. ... I’m thrilled,” Coleman said. He predicted it will bring a thousand construction jobs to northeastern Minnesota, hundreds of permanent jobs and “billions of dollars worth of investment.”

The vote came as the Senate prepared to sign off on its 768-page energy bill, which also calls for doubling the nation’s use of ethanol by 2012 and giving billions of dollars in subsidies to energy companies. Passage of the bill was all but assured after a 94-4 Senate vote to limit debate; a final vote was set for Tuesday.

Backers of the legislation say it will increase the nation’s energy supply and lead to lower natural gas prices, benefiting homeowners and businesses. Critics said it is filled with wasteful subsidies that put taxpayers at risk, citing the Iron Range plant as a prime example.

“It’s a good gig if you can get it, if you can get the full backing of the U.S. government to co-sign on your loan for a massive facility, but it still doesn’t make a lot of sense,” said Keith Ashdown of the watchdog group Taxpayers For Common Sense.

Reflecting the mysterious ways of Congress, the Minnesota coal-gasification project is not mentioned by name in the bill. It’s referred to as “a project located in a taconite-producing region of the United States.”

Coleman has been a staunch defender of the project, which has been roundly criticized by Sen. John McCain, R-Ariz.

“There’s some folks who oppose loan guarantees,” Coleman said. “John McCain has a clear position: He looks at things that we see as investment and good policy and he says, no, it’s something else.”

Although the legislation does not include a specific amount of aid, Coleman said he expects the Senate to ultimately approve $800 million in federal loan guarantees for the Mesabi project.

In its analysis, Taxpayers For Common Sense said the bill would provide “unlimited loan guarantees” to cover as much as 80 percent of the total cost of developing new and untried energy projects. The nonpartisan group estimated the total cost of the bill at $56 billion.

“Loan guarantees have become the lesser of subsidy evils,” Ashdown said. “It’s not real money, so they think they can throw loan guarantees at every energy interest. But it’s a question of, does it get paid back?”

The energy bill has strong backing from both of Minnesota’s senators. In a speech on the Senate floor, Dayton said that alternative fuels now provide less than 3 percent of the nation’s energy supply. An advocate of ethanol, he noted that gasoline consumption in the United States is expected to increase by 26 percent in the next seven years.

“Where will we get the increased supplies?” Dayton asked. “How much will we have to pay for them?” While he backed the bill, he said: “I just wish that it did more.”

The House approved its energy bill in April, and President Bush is eager to sign a bill into law. Before that happens, a House-Senate conference committee will meet in an attempt to resolve differences between the two bills. The biggest dispute is over a House provision that would shield the gasoline MTBE (methyl tert-butyl ether) from product liability lawsuits.