IMPORTANT READ:The Journal of the American Medical Association coming forward with important information about Carbon Capture and Sequestration. Health and Safety Risks of Carbon Capture and Storage - 52 KB pdf
Journal of the American Medical Association [JAMA] (pg. 67) January 6, 2010; By John Fogarty, MD, MPH and Michael McCally, MD, PhD
FINAL EIS CommentsComments submitted by the CAMP volunteers can be found here: FEIS Comments
Click on the links below to view comments submitted by the Minnesota Pollution Control Agency, Minnesota Department of Natural Resources and the Fond du Lac Band of Lake Superior Chippewa.
Comments by MPCA
Comments by DNR
Comments by Fond du Lac
FINAL EIS RELEASEDThe following files are large documents and have been made available to the public. The files can also be found at: http://www.gc.energy.gov/NEPA/1167.htm.
The volumes have been broken down into smaller pdf files for download. Please see the Take Action page.
Volume 1 - 24 MB pdf
Volume 2 - 117 MB pdf
Volume 3 - 57 MB pdf
EIS DelaysSometime in November 2009
The current scheduled release can be found on the Department of Energy's website - http://www.eh.doe.gov/nepa/
CLEAN COAL EXPOSED BY REALITY CAMPAIGNPlease check out the TV ads on "Clean Coal" by the Reality Campaign. CAMP is pleased to finally see a national campaign on the myth of "clean coal". The link provided brings you to the Reality Campaign's website where you can view video clips of their ads, the latest being an air freshener with the name of "Clean Coal Clean"
Clean Coal Ads
MINNESOTA PUBLIC UTILITIES COMMISSION MAKES TWO RULINGS FAVORABLE TO CAMPCorrecting Errors in Previous Order
At its meeting on June 12th, the PUC unanimously granted CAMP's petition to correct erroneous information in a previous PUC order (Docket No. 07-1640). The corrections make it clear that: the DOE funding of the Mesaba Energy Project is a loan rather than a grant; and the MEP has not yet been awarded any federal loan guarantees.
Denying Excelsior's Request To Delay PUC's Final Decision on Power Purchase Agreement
In April the PUC denied Excelsior's request to indefinitely delay consideration of Phase 2 of the PPA (Docket No. 05-1993). Excelsior then filed a Petition for Reconsideration of this decision. At its meeting on June 12th, without discussion, the PUC unanimously refused to reconsider its earlier decision.
Now we are waiting for the PUC to again (3rd time's the charm?) schedule a hearing where it will decide: whether to grant Excelsior's position under Phase 2 of the PPA; and whether to set a deadline on negotiations between Excelsior and Xcel regarding Phase 1 of the PPA.
Excelsior Concedes to CAMP's Corrections in PUC's OrderIn response to CAMP's Petition, Excelsior's Attorney has notified the PUC that the Order should be corrected as CAMP requested.
Starns 5/23/08 letter
CAMP seeks correction of errors in PUC Order regarding Mesaba's financial status.CAMP has submitted a petition to the PUC to correct misstatements concerning the Mesaba Energy Project's financial postition. Below is a link to the petition.
Petition to PUC - 88 KB pdf
A Letter to Governor Pawlenty from Dr. James Hansen, NASA Goddard Institute and Columbia University Earth Institute"There is no such thing as 'clean coal'."
CAMP is posting this most extraordinary letter that concerns global warming, coal, power plants and CO2.
Letter to Governor Pawlenty - 128 KB pdf
INTERESTING READING - MORE DEFICIENCIES IN MESABA'S DEISCAMP has just discovered that the Minnesota Dept. of Commerce failed to timely and properly post comments received on the Draft EIS from the Army Corps of Engineers and the Environmental Protection Agency. The EPA has "environmental objections to the proposed project" and also states that "additional information needs to be provided to support the impact analysis". The ACoE states that there continue to be several NEPA deficiencies in specified areas.
Comments from both agencies are provided at these links to the respective pdf documents. They can also be found with the Resource Materials:
Army Corps of Engineers comments - 704 KB pdf
US EPA comments - 408 KB pdf
CAMP Comments to ALJCAMP submitted comments to Administrative Law Judge Steve M. Mihalchick regarding the Joint Permit Application: Plant Site, HVTL Route and Natural Gas Pipeline Route for the Mesaba Energy Project.
The comments can be found at this link.
The four volumes of the transcript of the public hearings on the Mesaba siting docket are available at the Grand Rapids Area Library.
Vol. I is from the first day of hearing, at Taconite.
Vol. II is from the evening session at Taconite.
Vol. III is from the day session at Hoyt Lakes.
Vol. IV is from the evening session at Hoyt Lakes.
Vols I and IV contain interesting questions that were put to the witnesses and some revealing answers.
Agency Draft EIS CommentsThere were several governmental agencies that submitted comments for the draft evironmental impact statement. CAMP has posted all agency pdf documents on the Resource Materials page for your convenience. CAMP encourages you to read through them as many are substantive and important to the comprehensive culmination of data on the draft EIS.
Page Links on CAMP Action
Letter to Legislators
CAMP Comments to ALJ
DEIS Comments Page One
DEIS Comments Page Two
Please contact the Webmaster if you experience any problems with our website.
June 21, 2013
IS THIS THE WAY THE MEP ENDS, NOT WITH A BANG BUT A WHIMPER?
Walking Away from $9.15 Million Debt With Impunity
IRRRB Commissioner Tony Sertich is proposing a subterfuge apparently designed to quietly close the door on the Mesaba Energy Project in order to minimize embarrassment for the agency and for Excelsior Energy and its principals, Tom Micheletti and Julie Jorgensen. Sertich has asked the Board's "blessing" for his proposed "restructuring" of the agency's loan agreements with Excelsior. Under this plan, Excelsior would never have to make any more payments on the outstanding principal of $9.15 million, or on more than $10 million accumulated interest.
Sertich's memo states (misspelling of project as "Mesabi" in original):
This proposal does four things:
6/17/13 IRRRB Meeting
At the meeting Representatives Metsa and Bakk suggested that "net proceeds" needs to be more clearly defined so that the IRRRB recovers the principal and interest first. Representatives Dill and Anzelc questioned the appropriateness of Excelsior's sharing in any "net proceeds" in the event that the project is ultimately "repossessed" and sold by the IRRRB. Sertich explained that: the principals "have deferred payments to themselves"; and this was designed to keep them involved in the event the agency needs assistance in developing the project.
CAMP's take: No one questioned the absurdity of this explanation: an examination of Excelsior's financial statements would show that the principals paid themselves handsome salaries, at one point as much at $300,000/year each; and if some entity wants to purchase the permit to build a power plant on the approved site (such as Minnesota Power), it would not need the assistance of incompetent "developers" who have failed to achieve anything other than this permit for $40 million of public funds. If the IRRRB really needed assistance from Micheletti and/or Jorgensen, they should be expected to provide it in recompense for the public funds they squandered under the guise of assisting the people of the Iron Range with economic development.
Sertich asserted that the commissioner has the authority to revise the loan agreements and he does not want the Board involved in the negotiations. He also said that: no details have been finalized although the parties have "been going back and forth already"; and he would provide more details to the Board after they are worked out. He stated that if nothing is done, Excelsior will "walk away", resulting in a loss of the $9.15 million owed.
CAMP's take: Sertich's explanation ignores the fact that under the terms of the agreements, the agency could: hold Excelsior to the existing agreement; if Excelsior does not conform, declare it in default and demand immediate payment of entire principal and interest; and when that is not forthcoming, get a judgment against Excelsior to take its assets now rather than waiting until 2019, as it could have done at various times during earlier defaults.
Interest Rate and Nonpayment
Sertich's memo does not make it clear that the new interest rate of 3% is a reduction from the current 5%, which was a reduction from the original 20%. (Rep. Dill revealed his ignorance of these facts at the meeting.) The interest rate was set at 20% in recognition of the risk level. In April 2007 Excelsior defaulted on the $952,376 due as interest on the first loan. Tom Micheletti requested an extension and before it was granted, Excelsior requested and received a payout in the sum of $2.75 million. In late July Commissioner Sandy Layman granted until the end of 2007 for the payment and said that an extension to the end of 2009 would be granted if, by the end of 2007, Excelsior achieved: either an approved power purchase agreement for 450 MWs; or a third-party equity investment of $100 million. Neither of these things happened. In August 2007 the PUC "disapproved" the PPA that Excelsior was trying to force on Xcel Energy. In December 2008 the IRRRB postponed interest payments to 12/31/10 but refused to stop accrual of the interest, whch would amount to about $2 million per year. In December 2010 the agency: reduced the interest rate to 5%; eliminated the requirement for annual interest payments; and agreed that if Excelsior would pay off the entire principal by 12/31/17, the interest rate would be recalculated at 3% per year.
CAMP's take: Although Excelsior has failed to meet any of the stated conditions, the rate is now being reduced to 3%. Perhaps the agency thinks this doesn't matter, given that no interest payments have ever been made and likely never will be.
Principal Nonpayment and Modifications
Excelsior was supposed to pay $800,000 per year on the principal, starting in December 2009, which it also failed to do. After repeated extensions of the due date, payment was supposed to be made by December 2010. At a non-public 8/10/10 meeting, an IRRRB committee discussed Tom Micheletti's proposed changes to the terms of the loans, and the Board rubber-stamped these amendments at its meeting on August 19th. The annual principal payment was to start in December 2010, reduced from $800,000 to $100,000. Excelsior paid $100,000 in December of 2010, 2011 and 2012, in addition to the $40,000 repayment required after an audit in 2008, for a total of $340,000 repaid out of $9.5 million.
CAMP's take: Given that all of the public funding has been exhausted, this $300,000 likely came from a loan by Micheletti and/or Jorgensen to the corporation. Apparently they have decided that they are no longer going to risk their own funds, given recent adverse events: Minnesota Power indicating that it will not need any new natural gas generation before 2020; MISO terminating the agreement for connecting the project to the grid; and failure to obtain an air permit. So Excelsior's friends on the Board encouraged the commissioner to relieve them of this burden, as indicated by Rep. Dill's saying to Sertich at the meeting: "I asked you to do this."
It would be interesting to know whether Excelsior has continued providing the required audited annual financial statements to IRRRB, and what assets and liabilities they show. Sertich argues that this restructured agreement provides collateral and so is an improvement over the previous "unsecured" agreement but that is: not correct, given the agency's ability to declare a default and call in the money owing; and meaningless if there are no assets of any value. If IRRRB takes the assets in 2019 what is there?
Repeated Concessions Enabled Excelsior to Spend It All & Default With Impunity
There were numerous red flags and opportunities to abort this fiasco early on and throughout its history.
Lobbying - First, Last and Always
From start to finish, Excelsior has excelled at lobbying, on both the state and federal levels. In 2008 the Office of the Legislative Auditor concluded that: Excelsior had "used loan funds for some expenses that appear to be related to lobbying activities"; the IRRRB had not clearly defined prohibited lobbying costs and failed to consider whether some of the salaries which were reimbursed were actually for lobbying activities; and OLA could not determine whether the IRRRB had improperly reimbursed Excelsior $126,480 for payments to a law firm that may have been for lobbying because the IRRRB had discarded the records.
Tom Micheletti recently told the Minneapolis Star Tribune that Excelsior needs relief from its obligations under the loan agreements because "We don't have unlimited resources". Nevertheless, Excelsior has sufficient resources to pay lobbyists. Reports recently filed for the first five months of 2013 show that Excelsior has continued to pay lobbyists Christopher DeLaForest, Judy Cook, James Girard, Kathleen Micheletti, and Douglas Johnson for efforts to influence legislative and administrative action, as it also did during the second half of 2012 and previous reporting periods.
March 18, 2013
ANOTHER WHEEL COMES OFF THE MESABA ENERGY PROJECT
Termination of Agreement to Connect Mesaba to the Grid
Excelsior Energy has "breached its obligations" by "failing to provide a deposit for restudy after suspending its obligations under (the agreement) for three years". Thus states MISO in its 3/5/13 letter to FERC, seeking to terminate, effective May 4, 2013, its agreement for connecting the Mesaba Project to the grid.
MISO & FERC
MISO (Midwest Independent Transmission System Operator), under the supervison of FERC (Federal Energy Regulatory Commission), conducts studies and evaluations to manage regional (15 midwest states and Manitoba) planning for generation and transmission of electricity. It provides access to the transmission system for generator interconnection projects, such as the MEP. In order to get a project into MISO's lengthy queue, a developer must file a detailed application, pay significant fees, and go through a lengthy study process.
"Important Milestone" Undone
In July 2007, with great fanfare, Excelsior Energy announced the achievement of "an important milestone" - signing agreements with MISO, after 32 months of extensive studies, to connect both MEP sites to the grid to accommodate 603 MWs from the first unit. The agreements required the MEP to fund $81.5 million in upgrades to the system, to be done by Minnesota Power (transmission owner).
In a 3/5/13 letter to FERC, MISO gives notice of termination of its agreement with the MEP. The detailed explanation of Excelsior's breach and default is concealed in an exhibit containing "non-public confidential information" but MISO asserts that it has given notice to Excelsior, which has not taken appropriate steps to rectify the situation. Failure of a breaching party to cure a breach within 90 (or in some cases 30) days of receiving notice results in default. MISO asserts that termination of the agreement is just and reasonable, and consistent with the public interest because leaving the MEP in the queue causes harm to the transmission owner (Minnesota Power), to MISO, and to other projects in the queue.
MISO argues that: the suspension period has expired and no additional time can be permitted; an uncured default demonstrates that the project is speculative, and therefore at greater risk of not proceeding to commercial operation; despite having progressed to this stage of the process, the MEP is "not making progress towards commercial operation"; and termination of the agreement does not necessarily terminate the project for all time because the MEP may submit a new request and reenter the queue at any time.
We'll be watching for FERC's decision.
Minnesota Power: Doesn't Need MEP's Output
CAMPers previously speculated that MP might include Excelsior's natural gas MWs in its new resource plan. The same speculation appeared in a recent article in the Scenic Range News Forum, where Tom Micheletti was quoted as being confident that someone would need his project or its output by the 2019 expiration date on its existing permits.
However, in the plan filed 3/1/13 with the PUC, MP stated, regarding the PUC's directive to address the possible need for 400 to 600 MW of natural gas capacity in the 2014-2016 time frame:
"As this Plan illustrates, a natural gas combined cycle unit is not economic for Minnesota Power's customers prior to 2020 largely due to an industry surplus of economic (sic) power. However, natural gas combined cycle technology is in the long-term planning horizon and will likely be Minnesota Power's next large power supply addition beyond 2020."
The comment period on MP's plan expires March 25, and MP has until April 2 to respond. Then the PUC will schedule a hearing and proceed to a decision regarding MP's resource plan. We'll be watching developments.
Air Permit and Political Maneuvering
As of the beginning of March, there had been no further activity on the air permit at the PCA.
Excelsior reported spending money on lobbyists and lobbying to influence legislative action during the second half of 2012. This raised suspicions that some new legislative favor might appear during the current session. So far nothing has surfaced but the historic pattern has been for last-minute surprises. We'll be watching.
January 11, 2013
EXCELSIOR BUYS LAND AND MAKES PAYMENT TO IRRRB
At the land auction on 12/19/12 Excelsior Energy purchased the 240 acres that constitute part of the footprint and buffer zone for the Mesaba Energy Project at the Scenic Highway/Taconite site. Tom Micheletti outbid Zimmerman Realty at $190,000. Apparently Excelsior recognized that its site permit was in jeopardy if it lost all ownership interest in this parcel. Excelsior still has an option to purchase RGGS's interest in approxmately 30 other parcels, totaling about 1400 acres, constituting the site and routes approved by the PUC for the first two plants of the MEP.
$290,000 - Whose and Why?
IRRRB has confirmed that Excelsior made the $100,000 payment due in December. As there is no known source of public funding still available, Excelsior's principals are likely lending these sums to the corporation with the expectation of being paid back and/or making a profit from the project, either by selling it or building it. The more likely option seems to be selling it. The most likely purchaser appears to be Minnesota Power.
Minnesota Power's Role
Minnesota Power is being required by the PUC to present a scenario to add 400 to 600 MW of natural gas capacity in the 2014-2016 timeframe. Minnesota Power's plan for this and other issues surrounding its coal plants is to be filed by 3/1/13. Minnesota Power has also started the approval process for a major new transmission line from Manitoba to Duluth - The Great Northern. It is not yet clear whether this line would be routed to serve the Taconite site. CAMP will be watching for Minnesota Power's filings on these two PUC dockets.
CAMP will need to reconsider its position in the event that Minnesota Power wants to put a NG plant on that site. As Co-Chair Charlotte Neigh was quoted in the Minneapolis Star Tribune: "If it comes down to building a natural gas plant to produce energy for which there is a demonstrable need, that takes away a whole lot of reasons for objecting to it. It is not the same six coal plants that nobody wants."
However, many CAMPers have significant reservations about the suitability of the designated site.
Air Permit & Political Maneuvering
Excelsior has not yet filed an application for an air permit, although its principals reportedly met with PCA's commissioner and assistant commissioner in December. They also have been sighted at the capital meeting with some Iron Range legislators. Sen. Tomassoni is now chairing an energy committee and Sen. Bakk has enormous influence as majority leader in the session that began this week. Both legislators have been instrumental in achieving special legislation for Micheletti in the past. CAMP will be watching for bills to enable any new scheme.
December 8, 2012
A SITE PERMIT BUT NO SITE?
The Scenic Highway/Taconite site for the first two units of the Mesaba Project, which received a permit from the MPUC, is about to be sold out from under Excelsior Energy. One quarter of the section of land designated for the plant's 200-acre footprint, and 80 acres to the south, are being sold at sheriff auction. It appears that about 20%-30% of the plant's footprint will be lost, as well as all of the designated "buffer" land to the west and southwest.
Since 2005 Excelsior has had an option agreement to purchase RGGS' interest in about 30 parcels for its station footprint, buffer land, and associated facilities. However, RGGS has only a small interest in some of these parcels, including a 1/128 interest in the 240 acres that are being sold. Zimmerman Realty, which owns 124/128 interest, commenced a court action to force a sale, so that it can be the sole owner. This will terminate Excelsior's option on a 1/128 interest in these 240 acres.
Excelsior defaulted in the court proceeding, not responding to the complaint or appearing at the hearing. Whether its option on RGGS' 1/128 interest has any monetary value will be determined later by Judge Hawkinson but the order already indicates that the total value of RGGS' interest is about $3,000.
Significantly, unless it enters into an option agreement with the new owner, Excelsior will have no ownership interest in a critical piece of the site that has been given a permit by the MPUC. CAMP hopes to find out whether the MPUC considers this a basis for revoking the site permit. Some of the route permits may also be affected by this sale.
Interested CAMPers should plan to attend the sale in the sheriff's office at 10:00 a.m. on December 19th. We'll report on what happens.
Based on a drastically reduced repayment schedule for the $9.5 million that Excelsior got from the IRRRB, a payment of $100,000 is due before the end of December. Given that Excelsior apparently is out of public funds, it will be interesting to see whether it makes this payment. Rep. Tom Anzelc will inquire about this at the 12/13/12 meeting of the Board.
NO AIR PERMIT
Although the MPUC confirmed that Excelsior could switch its project to natural gas (NG) with no further environmental review (see 8/16/12 CAMP Update), and the PCA has allowed Excelsior to submit a revised application for an air permit for a NG plant without paying another application fee, no such application has been filed.
Does this lack of activity indicate that Excelsior has given up? Or is it counting on having until 2019 to begin construction? Or does it have another trick planned for the upcoming legislative session? CAMPers will keep watching for clues.
August 16, 2012
PUC RUBBER-STAMPS 2011 LEGISLATION
Excelsior Energy's reported $120,000 spent on lobbying during the 2011 session paid off this week. Despite their obvious frustration and dissatisfaction, the Public Utility Commissioners acknowledged on Tuesday that the legislature had limited the PUC's usual authority (see the 5/23/11 update). Commissioner Reha voiced her opinion that: an interesting legal issue could be raised in court regarding how the 2011 amendment circumvents the original intent of the 2003 legislation to support an "innovative" energy project; but such a challenge is not within the jurisdiction of the PUC and would have to be pursued by some affected party. Under the circumstances, the commissioners felt compelled to allow the site and route permits issued in March 2010 for the Mesaba Energy Project to remain valid even though the project has been changed from an "innovative" coal-gasification plant to a "white bread" natural-gas plant with little likelihood of being converted to coal gasification.
This decision confirms that no further environmental review by the PUC (beyond the previously accepted Environmental Impact Statement) is necessary for the site and route permits. However, that EIS and other required information will be used by the Pollution Control Agency as it considers whether to issue an air permit for the NG plant, which is the next step in Excelsior's development of the project.
The PUC is requiring that at least 180 days before beginning construction (anytime until 2019), Excelsior file a plan showing that it will comply with the terms and conditions of the previously issued site permit. Although Commissioner Reha thought that some modifications to the permit would be inevitable, Excelsior's attorney maintained that possibly no additional action by the PUC would be required. The economics of the project will not be considered by the PUC unless one of the utilities that it regulates proposes to buy the project or its output.
The PUC Chair noted the unknown specifics of the project, including what, if anything, will be built and when. Commissioner O'Brien expressed his "substantial reservations" about approving a "non-innovative gas plant for unidentified reasons" and characterized it as a "leap of faith" that might lead to "mischief". Although the Chair stated that the current statute would not require Xcel to buy the output, Commissioner O'Brien said that "depends on the driver's intent" and the best way to predict that is to look at the past when Excelsior attempted to force a power purchase agreement on Xcel.
Apparently Tom Micheletti and Julie Jorgensen believe they yet can profit from this project, as Excelsior continues to incur expenses that are no longer reimbursed by public funds. The IRRRB's $9.5M and the RDF's $10M have been spent and the DOE has announced that it is not continuing its funding after expending approximately $22M. Given the unlikelihood of additional private investors or that the project has qualified for a loan, it is likely that the only two known shareholders are now funding the effort, expecting some future financial benefit.
Although Jorgensen has previously mentioned Minnesota Power as a possible purchaser of the project or its output, it doesn't appear that the Taconite site would be the best choice for MP's system. This may be clarified in March 2013 when MP files its new integrated resource plan, showing its intentions for replacing coal-fired generation with renewables and natural gas over ensuing years. MP is also developing proposed routes for a new transmission line to bring hydro power from Canada to the Iron Range and beyond, which might tie into the Taconite site.
Need to Keep On Keepin' On
Thanks to Carol Overland and Bob Tammen for testifying at the hearing and reminding the commissioners of the history of this project and its principals. CAMP will be watching for developments, including new transmission lines and natural gas pipelines that may affect CAMPers.
May 14, 2012
SUNSHINE RESTORED AT IRRRB AFTER ANZELC DOES THE HEAVY LIFTING
(Follow-up to 4/24/12 Update)
Governor Dayton has signed the data practices bill that includes a section pushed through by State Rep. Tom Anzelc. It repeals the 2008 amendment sneaked in by State Sen. Tom Bakk, which kept the public from getting information from the IRRRB about how its fund recipients spend the tax money that is supposed to benefit Iron Rangers.
IRRRB Commissioner Tony Sertich and Bakk did not support Anzelc's effort, and predicted negative consequences if fund applicants and recipients had to face public scrutiny. After the bill passed, Bakk passed up an opportunity to comment to the Duluth News Tribune for its 5/9/12 report. MPR's report can be found here.
The DNT reports that Sertich now predicts no fallout from the pending repeal of the 2008 privacy provision. Perhaps he was persuaded to see it the Governor's way.
State Rep. Tom Rukavina, who said in 2008 that he agreed with Bakk's "minerals" article that included the secrecy provision, now says that change occurred without the knowledge of many of the lawmakers who served on the IRRRB, and the agency could easily enough go back to operating as it had in the past. So why did those lawmakers not support Anzelc's efforts?
The opening of the files is retroactive, so the information previously denied to CAMP can be found. It is likely that some investigative reporter(s) will look into the IRRRB files regarding the Excelsior Energy loans. If not, we may need a team of CAMPers to do it.
April 24, 2012
PENETRATING IRRRB SECRECY
State Representative Tom Anzelc has introduced legislation to reinstate the Data Practices Act for information relating to recipients of IRRRB funds. After CAMP exposed embarrassing financial information in IRRRB's files about Excelsior Energy, in May 2008 State Senator Tom Bakk sneaked in an amendment that made such information unavailable. CAMP discovered that trick when seeking more information in 2010. Anzelc has been unable to get a sponsor for his bill in the Senate, where Bakk wields intimidating power. Nevertheless, Anzelc has maneuvered it for possible inclusion in an omnibus bill that could come out of a conference committee.
The Iron Range legislative delegation and Commissioner Tony Sertich refuse to support more transparency for how IRRRB funds are spent despite critical coverage in the Duluth News Tribune and on MPR's website. These reports can be found here: MPR-4-4-12.pdf, DNT-1-24-12.pdf and DNT-4-22-12.pdf; Duluth News Tribune editorial.
CAMP posted this comment on the DNT website on 4/22/12 in reaction to Passi's report:
"Sen. Bakk's claim that his sneak legislation was usual "housekeeping" is disingenuous. His proposal to exempt the IRRRB from the state's Data Practices Act (DPA) should have been offered as a bill and put through the open committee process rather than deliberately concealed in the confusion at the end of the session. Not even the chair of the House tax committee knew these seven lines were buried in Bakk's 14-page "minerals" article.
DEED Deputy Commissioner Moe rightly points out the need for a business seeking state funding to provide more details about their finances and dealings than they might like. In the instance of Excelsior Energy, the IRRRB would have liked to conceal that its inexperienced promoters were risking only $60,000 of their own funds while spending $9.5 million of IRRRB funds, in addition to another $32 million in public funds. Public scrutiny is all the more necessary given the IRRRB's inability or unwillingness to see the folly in such loans.
Under the terms of the DPA the IRRRB was able to conceal parts of the documents released in 2007, and did so. The failure of IRRRB and the Iron Range delegation to support Rep. Anzelc's bill is a disgrace. If Commissioner Sertich were truly concerned with "restoring public trust in the IRRRB", he would gladly resubmit the agency to the jurisdiction of the DPA, which contains sufficient provisions to protect sensitive and private information."
Credit Rep. Anzelc
We'll be watching to see whether Rep. Anzelc's bill succeeds despite the resistance of his Iron Range colleagues. He deserves credit for his efforts.
WATER AND AIR PERMITS
Water appropriation permits were issued on March 8, 2012 for the Mesaba Energy Project Units I and II (Taconite site) to take water from three pits: Lind, Canisteo and Hill-Annex. However, Excelsior Energy has not yet acquired riparian rights to any of the pits and the permits are not valid until they do. Excelsior also needs to acquire permission to cross state lands with pipelines from the DNR Division of Lands and Minerals. Click here (4 MB pdf file) for the DNR documents.
In recent months the PCA has twice rejected as incomplete Excelsior's updated application for air permits for the original coal-gasification facility.
The latest word from the PCA is that Excelsior appears to be working on a new application for a natural gas combined cycle (NGCC) facility rather than one using the original coal gasification technology (IGCC). The special treatment for the IGCC plant provided in the 2003 legislation was inappropriately extended to an NGCC facility by special legislation during the 2011 session. (See CAMP's 5/23/11 report: Governor Caves In.)
NATURAL GAS FACILITY
As CAMP stated last May:
"How Excelsior expects to profit from this bill is a mystery. Co-CEO Julie Jorgensen told the Senate energy committee that the project won't be built unless some utility wants it and seeks permission from the PUC to build it . All of Minnesota's major utilities have plans well into the future that do not require the additional MWs that this plant would provide. Also, given its debt load, buying it might be more expensive for a utility than starting from scratch and locating a NG plant elsewhere than on the Taconite site where no NG is available."
Knowledgeable observers of the utility industry point out that Xcel and Great River Energy have cut back on plans to increase output because the market is awash in cheap electricity. Otter Tail Power doesn't need additional power and GRE's coops also have too much capacity. Minnesota Power has just completed a 15-year plan showing that it has all the power it needs. If MP were to develop a need for an NG plant, it likely would build and control it in a location closer to its own infrastructure and existing permits and avoid the need for new transmission from the Taconite site, another problem with Excelsior's plan.
WHO'S LEFT AT EXCELSIOR ENERGY?
A person who dropped into Excelsior's latest office in downtown Minneapolis looking for Tom Micheletti found two people working on permitting behind a locked door in a sparsely furnished office. The Coleraine office is staffed only three hours per day. The recent DNT report quoted Pat Micheletti as Excelsior's spokesman, although his position at the company was eliminated years ago.
The page on Excelsior's website that previously listed its "leadership" team has disappeared. The former general counsel and assistant general counsel have taken jobs elsewhere.
Excelsior's PAC for federal campaign contibutions has been terminated (after distributing its remaining funds to Congressmen Kline and Paulsen, and Senator Klobuchar).
Of the 24 lobbyists previously registered in Minnesota, only 7 are still on the roster: Judy Cook, Jim Girard and Kathi Micheletti from the same lobbying firm; Christopher DeLaForest; Douglas Johnson; and Julie Jorgensen and Tom Micheletti.
CAMP REMAINS VIGILANT
CAMPers will continue trying to decipher the mystery that Excelsior Energy has become.
October 10, 2011
MORE MEDIA COVERAGE - DO OUR LEGISLATORS CARE?
The Grand Rapids Herald Review has published CAMP's guest commentary regarding the upcoming IRRRB meeting, citing the need to reverse the secrecy protecting financial information about recipients of IRRRB funds. It can be found here.
Also below on the 9/18/11 update is a link to a column by Duluth's Pete Langr, questioning why early warning signs were ignored while granting millions of public dollars and special privileges to Excelsior Energy's Mesaba Project.
The IRRRB will meet at 10:00 a.m. on Thursday, October 20th at the agency's building on Hwy 53, 2 miles north of Hwy 37. The meeting is open to the public, including any CAMPers who are interested in attending.
State Rep. Tom Anzelc will offer two resolutions: one would support legislation to reinstate the jurisdiction of the state's data practices law over the financial information relating to IRRRB fund recipients; the other would direct staff to renegotiate the terms for repaying the $9.5 million Excelsior debt, to require more than $100,000 per year.
CAMPers are encouraged to contact their state legislators who sit on the IRRRB, asking them to support Rep. Anzelc's resolutions, especially the one to restore tranparency and accountability at the IRRRB.
State Sen. Tom Saxhaug: firstname.lastname@example.org
Rep. Carolyn McElfatrick: email@example.com
Rep. Carly Melin: firstname.lastname@example.org
Rep. Tom Rukavina: email@example.com
Messages also can be sent to IRRRB Commissioner Tony Sertich: T.Sertich@state.mn.us
October 6, 2011
CAMP'S GUEST COMMENTARY IN SRNF
The Scenic Range News Forum has published a guest commentary asking the questions the public wants to know but Excelsior Energy, Iron Range legislators and the IRRRB have not wanted to answer. It can be found here in pdf format: EXCELSIOR ENERGY'S MESABA PROJECT: $40 MILLION GONE FOR WHAT?
We'll let CAMPers know what action, if any, is taken at the IRRRB meeting on October 20th.
September 18, 2011
A MORE FUNDAMENTAL QUESTION: WHY WERE $ MILLIONS GIVEN TO THE MESABA PROJECT?
In the Duluth Budgeteer columnist Pete Langr asks "Why did so many jump onto the bandwagon so quickly for a project that practically screamed 'Caution, go slow'?"
Langr reviews the warning signs and cautions that the Iron Range's desperation for jobs is not good enough reason to leap into large industrial projects without careful investigation and analysis.
Langr's column, as published in the Duluth News Tribune, can be found here: Just say 'jobs,' we'll do what you want.
September 12, 2011
EXCELSIOR'S LOBBYING AND CAMPAIGN SPENDING EXPOSED:
". . . (T)he company may have improperly used money to influence government entities and officeholders".
In the Duluth News Tribune Peter Passi has reported an investigation that discovered nearly $1.8 million spent by Excelsior Energy and its CEOs on lobbying and contributions to political campaigns. The report questions whether some of the $40 million in public funding was spent on prohibited lobbying activities.
The report in pdf format can be found here DNT investigation: Excelsior lobbying cash questioned
Tom Anzelc: "I think they used public dollars to lobby public law-making bodies" • "Money corrupts the political process, and this may be an example of that".
Tom Rukavina: Knew the project was a gamble • Desperate because of unemployment from LTV shutdown • "Not the first time we (IRRRB) screwed up, or probably the last".
Tom Micheletti: Campaign donations don't influence policy makers.
More Than Shown
The $1.46 million reported as spent on state lobbying does not include the $220,000 spent prior to 2005, or the amount spent in 2011 that will not be reported until 2012.
Other entities that received payment from Excelsior as consultants and/or attorneys also employed active lobbyists and made campaign contributions.
It is likely that the $98,775 reported for state and federal campaign contributions does not reflect all of the contributions related to Excelsior. Related contributions have been made to local party units, which often pass them on to individual campaigns. Also, it is common for contributions to be made by lobbyists known to be representing a particular entity, issue or project. In addition, family members of Excelsior's CEOs have been noted on relevant donor lists.
Which Politicians Benefited?
The report notes that:
The report concludes by noting that Rukavina, who chairs the IRRRB, said that he is not against Anzelc's proposal to make Excelsior's finances more transparent: "I think things should be done in the open".
At its meeting on October 20th, the IRRRB agenda likely will include Anzelc's proposal to reinstate the jurisdiction of the state's Data Practices Act over financial information of entities seeking and/or receiving IRRRB funds.
CAMPers will be watching.
September 2, 2011
MORE MEDIA COVERAGE OF EXCELSIOR ENERGY'S BOONDOGGLE
DNT Publishes CAMP's Response to Excelsior's Excuses
The Duluth News Tribune has published CAMP's response to its investigative report and editorial, and the claims made by Excelsior Energy's co-CEOs. It can be found here: In response: Excelsior's talking points, excuses evade questions.
The four pieces from last week's DNT can be found below.
Ripple In Stillwater: Campaign Cash and Army of Lobbyists
Blogger Karl Bremer has done a masterful job exposing hundreds of thousands of dollars in political campaign contributions and lobbying expenses keeping this "boondoggle afloat for a decade".
"It's a scenario we've seen before: A private company forms to promote a dubious enterprise, hires politically connected lobbyists, sucks up millions in government grants, hands out boatloads of campaign cash to politicians who keep the government money flowing to enrich a handful of lobbyists and consultants—and then the cycle repeats itself over and over."
He identifies the players and amounts. Find it here: Campaign cash and army of lobbyists keep 'clean coal' boondoggle afloat for a decade.
Minnesota Brown: Test of Character, Leadership
In a hard-hitting Aug. 31st piece, Aaron Brown identifies the political figures responsible for enabling Excelsior's boondoggle and proposes steps necessary to reform the IRRRB so such things don't happen again.
Find it here: Range boondoggle now poses test of character, leadership.
IS ANYONE PAYING ATTENTION?
CAMPers need to insist that their elected representatives pay attention and support reforms.
A good place to start is reinstating the jurisdiction of the Minnesota Data Practices Act over the financial information provided by IRRRB borrowers. The Board can pass a resolution at its next meeting to introduce a bill in the next legislative session, restoring the kind of transparency that the Dayton administration claims to champion.
August 25, 2011
DULUTH NEWSPAPER REPORT REVERBERATES AND STRIKES A NERVE
Finally - Public Scrutiny of Excelsior's Finances
The recent media attention is gratifying to CAMPers who have been trying for years to get public scrutiny of Excelsior Energy's Mesaba Project. Peter Passi's two-part investigative report and the editorial in the Duluth News Tribune (DNT) have been picked up by the Associated Press, the Minneapolis Star Tribune, the St. Paul Pioneer Press, MinnPost (http://www.minnpost.com/) and Midwest Energy News (http://www.midwestenergynews.com/).
See part 1 here: Millions of public money spent, but Iron Range power plant still just a dream.
See part 2 here: Iron Range energy project seeks lifeline in more funding, new fuel source.
See the editorial here: Our View: Taxpayers have right to answers on Excelsior.
Apparently discomfited by the scrutiny, Excelsior Energy's co-CEOs, Tom Micheletti and Julie Jorgensen, have published a response: In response: Excelsior Energy project is an important energy option for state. to the "inaccuracies and misconceptions" about their company. Not surprisingly, they do not really respond to the concerns raised by the exposé or answer the ultimate question posed in the editorial:
Why didn't elected leaders demand more spending scrutiny?
Why has Rep. Anzelc been largely alone in waving a red flag?
Why did state lawmakers vote to hide from the funds-providing public financial information?
Why has there been no effort in the Legislature to provide more transparency, especially during the shutdown when every penny was being squeezed?
And, perhaps most pressing of all to taxpayers, what happened to our more than $40 million?"
Lack of Transparency Contrary to Public Interest
The exposé's focus on the lack of transparency is well placed. Sen. Tom Bakk's surreptitious maneuver in 2008 to make Excelsior's financial information unavailable to the public is not justified by his stated concern that total transparency might cause some companies not to seek financial assistance from the IRRRB. The IRRRB claims that it should protect the privacy of borrowers as a bank would do; however the IRRRB is a government agency responsible for spending millions of public dollars in the public interest, not a private, for-profit investment institution. The IRRRB's defense that loans and investments are approved at a public meeting is laughable, given that: the borrower's financial information is kept confidential even at that point; and prior to this year these meetings were used merely to rubber-stamp decisions already made at secret committee meetings.
CAMP brought the need for reform at the IRRRB, including problems caused by this lack of transparency, to the attention of the Dayton transition team in December 2010 (see CAMP's 12/11/10 Update below). CAMP also cited lax enforcement of the terms of the loans, and the fact that although the co-CEOs invested only $60,000, they were paying themselves $300,000/year each.
Unfortunately, Governor Dayton made no attempt to reimpose open data practices at the IRRRB and so we can only speculate whether the Micheletti/Jorgensen household has taken in more than $5 million in salaries from our $40 million.
Recycling Old, Worn-Out Excuses
Mystery of What's Next
Although Micheletti now declines to predict when the first plant will be built, he continues to assume that the plant's output is needed, although no such finding has been made by the state regulatory system, and Minnesota's major utilities assert that they do not need it. Micheletti claims that the company is currently trying to decide whether to proceed with both a coal-gasification plant and a natural-gas-fired plant at the same time or only one or the other. Given that Excelsior's decision to switch to natural gas surfaced back in 2010 and obtained legislative approval months ago, a more definitive direction and plan should be expected.
The DNT reports that as of September 2010 only $1.9 million of DOE's $22 million had not been spent. Given that Excelsior is required to match the DOE funds 1:1, and that Excelsior received only $19.5 million in the other public funding that it used for this matching purpose, perhaps Excelsior is unable to draw down the remaining DOE funds. In any case, given that Excelsior spent an average of more than $400,000 per quarter in 2010, it must be nearly out of funds by now.
Micheletti's claim that he is currently in active talks with potential customers should be evaluated in light of all of Excelsior's performance failures and unfulfilled promises over the last decade.
August 21, 2011
Duluth News Tribune Exposes Excelsior Energy's $40 Million
At last the financial benefits received by Tom Micheletti and Julie Jorgensen from public funding for Excelsior Energy's Mesaba Project have been exposed.
The first of a two-part investigative report by Peter Passi in the Duluth News Tribune can be found here: http://www.duluthnewstribune.com/event/article/id/207337/
If Excelsior's co-presidents continued paying themselves $300,000/year each through 2010, it is possible that their household benefited by more than $5 million.
CAMP will comment in greater detail soon.
May 23, 2011
GOVERNOR CAVES IN: EXCELSIOR ENERGY'S MESABA PROJECT RESUSCITATED
Natural Gas Plant Instead of "Innovative" Coal-Gasification
SF 1197 evolved into the omnibus energy bill passed by both houses of the legislature on May 22nd. It contains language allowing Excelsior Energy to keep all of its special privileges from the 2003 legislation if it builds a natural-gas (NG) fired plant instead of the "innovative" coal gasification plants it originally promised. The details and effects of the original bills were analyzed in CAMP's 2/24/11 update, which can be found below. The bills were amended after that but the effects are the same.
Without Legislation Project Would Fold
CAMP's previous prediction that the Mesaba Energy Project (MEP) would shut down if new special legislation failed has been validated. Despite Excelsior's earlier denial, this was the argument used on the House floor to garner votes. It also reportedly was what persuaded Governor Mark Dayton to withdraw his opposition to the provision, in order to avoid finally giving up on Excelsior's paying back some of the IRRRB's $9.5 million.
Rep. Mike Beard, sponsor of the original bill in the House, admitted that during recent negotiations the Excelsior language was removed from the omnibus bill at the request of the Governor but was subsequently reinstated when the Governor changed his mind. On the floor, Rep. Dave Dill argued that although the IRRRB might never get its money back anyway, that would surely happen if the provision didn't pass, and the money already spent shouldn't just be "flushed down the drain". Rep. Tom Rukavina said that although he didn't lke the proposal, it should be granted if it gives the project a chance to succeed. Rep. Jean Wagenius sensibly wondered how the proceeds from the altered project would suffice to pay off Excelsior's "megaloans" but no explanation was offered.
Opposition in the House
If Gov. Dayton hoped to have this section of the bill slip by unnoticed he was disappointed when an energetic debate developed in the House. Several knowledgeable DFL members of the House energy committee supported Rep. Andrew Falk's amendment to delete the Excelsior language from the bill. Using the word "boondoggle", he argued that: the project was not ever innovative and even less so using NG; no progress has been made; and the bill is terrible public policy. Rep. Tom Anzelc recited the history of the MEP dating back to 2001: going through $41million; not getting a PPA; not developing any jobs except for lawyers and lobbyists; and making only one recent payment to IRRRB of $100,000 rather than the millions due since April 2007 under the terms of the original loan agreements. He compared it to the "Bridge to Nowhere" and urged voting for the amendment. The amendment failed 54:76; the omnibus bill passed 82:49.
Facts Don't Matter
It is frustrating to listen to the discussion on the floor with Rep. Beard spouting misinformation and claiming not to know the embarrassing answers to some insightful questions. His lack of knowledge about the project is either unbelievable or shocking, given his role in carrying the bill for Excelsior. He even denied that Excelsior had spent more than 40 million public dollars, which Excelsior has admitted and which has been well publicized. Rep. Dill tried to minimize Excelsior's failure to pay the millions past due to the IRRRB by claiming that: the terms of loans for large projects often have to be renegotiated; Excelsior is current on its payments; and the project was hampered by the recession and a reduced demand for energy, ignoring the lack of permits and the PUC's denial of the PPA with Xcel. He also analogized that sometimes a plan to build a skyscraper has to be downgraded to a mall because "things happen".
In the News
The Duluth News Tribune reprinted a report by St. Paul Pioneer Press reporter Dennis Lien. It can be found here: http://www.duluthnewstribune.com/event/article/id/199856/group/homepage/
Other reporters were also interested in the kerfuffle in the House but apparently have been distracted by other developments as the legislative session ends with a budget impasse and no Vikings stadium.
How Excelsior expects to profit from this bill is a mystery. Co-CEO Julie Jorgensen told the Senate energy committee that the project won't be built unless some utility wants it and seeks permission from the PUC to build it . All of Minnesota's major utilities have plans well into the future that do not require the additional MWs that this plant would provide. Also, given its debt load, buying it might be more expensive for a utility than starting from scratch and locating a NG plant elsewhere than on the Taconite site where no NG is available.
Equally puzzling is Excelsior's claim to be continuing to work on finalizing its applications for water appropriation and air emission permits for the admittedly unfeasible coal-gasification plant.
CAMP will be watching for developments.
April 5, 2011
EXCELSIOR ENERGY'S MEP - IN THE NEWS
FROM MIDWEST ENERGY NEWS - April 5, 2011
"10 YEARS, $41 MILLION LATER, 'CLEAN COAL' PLANT STILL VAPOR"
By Dan Haugen
Using a hockey analogy, Dan Haugen's report lays out the failed history of the Mesaba Energy Project leading to Excelsior's latest quest for more special legislation. (See CAMP's 2/24/11 Update)
Converting NG to Syngas Unlikely Haugen seems appropriately skeptical of Excelsior's claim that it might eventually convert natural gas plants to syngas derived from coal gasification. CAMP's technical consultant advises that, although it is technically possible, it would be prohibitively expensive to convert an NGCC plant to an IGCC plant because the necessary combustion turbines are much more costly.
Out of Money? "Excelsior's attorney, Tom Osteraas, said all of the state and local money has been spent, along with nearly all of the $21 million it received in federal money for the project's first phase. The remaining federal funding is contingent on the plant being up and operating." The public funding for the preliminary design phase totaled $41,745,505. It is unclear whether some of the DOE's $22,245,505 is still available to Excelsior.
DOE Contact or Lack Thereof An interesting new bit of information is a statement from the DOE regarding Excelsior's lack of activity on the MEP: "Energy Department assistant press secretary Ebony Meeks said in an e-mail that "Mesaba applied for a loan guarantee in 2006 but has stopped contact with the Department regarding the project." (Osteraas denied that statement and said the company has "regular interaction" with the department "and they continue to support permitting efforts.")" In any event, it appears that Excelsior's hopes for a federal loan guarantee have ended.
Permitting - Lack of Progress The extent of Excelsior's permitting efforts is questionable. CAMP has discovered that key members of Excelsior's "leadership team" have disappeared from its website and CAMP's latest information from the Minnesota Pollution Control Agency is:
Political Odds Unclear Haugen was unable to determine the chances for passage of the new legislation, which has yet to be heard before a committee in either house. CAMP will be monitoring the progress of the bill and educating legislators about its faults.
FROM MINNEAPOLIS STAR TRIBUNE - March 27, 2011
"WHERE ARE THE JOBS?"
By David Shaffer and Glenn Howatt
The newspaper analyzed the results from millions of dollars in subsidies to boost hiring among private Minnesota employers, featuring the failure of Excelsior Energy. The report contrasts the promises made with the lack of results from $41.5 million.
State Rep. Tom Anzelc is quoted regarding "lawyers, lobbyists and consultants" being the beneficiaries of the IRRRB's $9.5 million. The article reports Excelsior's generosity to political candidates over the years:
"Excelsior executives have contributed $134,000 since 2001 to political candidates and groups of both parties. Congress enacted one law to help the project. The Minnesota Legislature passed two bills benefiting the company and is considering a third."
"Tony Sertich, commissioner of the Iron Range development agency, had supported the loan a decade ago, but said recently that the deal might not pass the board today."
"Excelsior executives said they remain committed to building a power plant and now are seeking legislation for a natural gas project that could be converted to coal gasification. "We think there will be customers for it," said Tom Micheletti, the company's co-president and CEO." CAMPers would like to know who these customers are.
Read the entire report at: http://www.startribune.com/premium/118656869.html
Below is the entire Midwest Energy News report and can also be found at:
10 years, $41 million later, 'clean coal' plant still vapor
>> Midwest Energy News
By Dan Haugen
HIBBING, Minn. – When a former high school hockey star proposed to develop a $2 billion "clean coal" power plant outside this northeastern Minnesota city, the news couldn't have come at a better time.
The region had just lost 1,400 jobs from a major taconite plant shutdown, the worst economic news to hit the Iron Range in two decades. The prospect of replacing those jobs was celebrated by citizens, politicians and newspaper editorials with the enthusiasm of a March tournament bid.
Nearly a decade later, after having spent nearly $41 million in taxpayer money, the Mesaba Energy Project still has yet to secure key environmental permits; it hasn't found a buyer for the electricity it wants to produce, and without a power-purchase agreement, it can't find investors to fund construction.
The project's backers are now changing their approach, seeking approval from the state's legislature to shelve the "clean coal" component — temporarily, they say — and move forward instead with a conventional natural gas power plant.
That has opponents changing their cries from "boondoggle" to "bait-and-switch" and some speculating whether the apparent change in strategy might be a Hail Mary attempt to salvage something from the long controversial energy project.
Or, in keeping with hockey analogies:
"They are pulling their goalie, because they need to score a goal now," said Aaron Brown, an author and newspaper columnist who has followed the project since 2001, first as a reporter and then as editor of the Hibbing Daily Tribune (he's also chronicled the project on his blog, Minnesota Brown).
The first period
Brown faults himself for not asking tougher questions early on. At the time, the level of community support was just about "euphoric," he said. The closure of LTV Steel's plant in Hoyt Lakes had cast a sense of desperation across the region. When Tom Micheletti — who comes from a well-known family of local hockey royalty — and his wife, Julie Jorgensen, proposed developing a 600-megawatt coal-gasification power plant on the site of the vacated taconite plant, it won immediate support.
Micheletti played hockey for Hibbing in the mid-1960s and later at Harvard. Three of his brothers were drafted by pro hockey teams, but Micheletti went to law school instead, graduating from the University of Minnesota in 1972. Since then he's held top leadership positions of some of the largest regional and national power companies, including Duluth-based Minnesota Power, Northern States Power (now Xcel Energy), and NRG Energy, where he met Jorgensen, who is a former NRG general counsel.
Micheletti and Jorgensen now live in Minnetonka, a Minneapolis suburb. They incorporated Excelsior Energy with a $60,000 personal investment in August 2001.
Later that year, the Iron Range Resources & Rehabilitation Board (IRRRB), an economic development agency funded by taconite production taxes, awarded Excelsior a $1.5 million unsecured loan, which was approved by then Gov. Tim Pawlenty. The board later increased the loan amount to $9.5 million.
A state lawmaker and fellow former hockey star, Sen. David Tomassoni, DFL-Chisholm, sponsored legislation in 2003 that granted the project another $10 million from a state fund that was set up to support the development of renewable electricity resources.
The legislation also gave the "innovative energy project" authority to use eminent domain, exempted it from having to study and prove the need for additional power generation, and mandated Xcel Energy to buy the electricity, pending approval from the state's public utilities commission.
The project's momentum carried into the following year, when the U.S. Department of Energy announced $36 million in financing under President Bush's Clean Coal Power Initiative. Supporters in Washington also inserted language into the Energy Policy Act of 2005 that authorized the energy department to offer loan guarantees to the project.
The gloves come off
This was about the point where Excelsior's smooth skating came to an end and referees started to intervene.
In 2006, a group of citizens in nearby Trout Lake Township, concerned about potential health, environment and property impacts, started to organize opposition to the project. They formed Citizens Against the Mesaba Project, or CAMP, and quickly broadened their scope to include economic and financial issues.
The group's data practices requests uncovered documents that raised questions about the company's use of public money. That eventually prompted an investigation by the state's legislative auditor, which criticized the Iron Range economic development board in a 2007 report for not adequately overseeing the use of its loan proceeds, some of which appeared to be used for lobbying and other "inappropriate, duplicate, or unsupported costs."
Meanwhile, opponents were lining up before the state's public utilities commission, which was charged with determining whether it was in the public's interest for Xcel Energy to purchase the power. Xcel, along with other utilities in the state, argued the gasified-coal technology proposed by Excelsior was not the most cost-effective and would lead to rate increases for customers if it was forced to purchase the electricity. The utilities commission sided with Xcel, ruling that a purchase agreement wasn't in the public's interest. After a series of appeals, the case was dismissed in 2009.
The following spring, the utilities commission approved site and route permits for the project, not on the former Hoyt Lakes taconite site, but at an unused industrial location about an hour and a half to the west, near the town of Taconite. Without a customer to buy the electricity, though, the company stands little chance of being able to finance the project.
Excelsior's attorney, Tom Osteraas, said all of the state and local money has been spent, along with nearly all of the $21 million it received in federal money for the project's first phase. The remaining federal funding is contingent on the plant being up and operating.
Energy Department assistant press secretary Ebony Meeks said in an e-mail that "Mesaba applied for a loan guarantee in 2006 but has stopped contact with the Department regarding the project." (Osteraas denied that statement and said the company has "regular interaction" with the department "and they continue to support permitting efforts.")
Now, the same legislators who supported the project in 2003 are attempting to toss it a lifeline. Sen. Tomassoni and Rep. Mike Beard, R-Shakopee, have introduced legislation (S.F. 417 and H.F. 618) that would allow Excelsior to build a natural gas power plant on the site and retain all of the perks awarded to it previously when it was considered an "innovative energy project."
The bill would also let the project keep its existing site and route permits and require regulators to issue all remaining air and water permits within 180 days of applying without holding additional public hearings.
The project's merits
Sen. Tomassoni has been the project's top supporter in St. Paul. When he first learned about the proposal, not only was his Iron Range district in need of jobs, but the state's utilities were forecasting a need for new baseload power within the next 15 years. Meanwhile, public concern over global warming was rising, and the Bush administration was touting "clean coal" as an innovative technology to combat climate change.
When the state's legislature reopened negotiations with Xcel Energy about nuclear cask storage on Prairie Island, Tomassoni saw an opportunity and attached support for the project to the nuclear legislation.
Since then, much has changed. In 2007, the state's legislature passed a 25 percent renewable electricity standard, which shifted utilities' focus away from fossil fuels and toward renewables like wind, solar and biomass. A historic recession threw off the utilities' previous power demand forecasts, postponing the urgency for new power plants. And new drilling and discovery techniques caused natural gas prices to drop and stabilize, putting the fuel in close competition with coal.
Excelsior's attorney downplayed the significance of the legislation and disputed that it signals a change in direction. Osteraas explained that the facility they proposed is a two-piece operation. The first is essentially a coal refinery, in which coal is converted into a synthetic gas. The second piece is a gas-burning power generator. If the current legislation passes, it would allow Excelsior to build the second component first and power it with natural gas. The coal-gasification element could be added later, "if and when" economic conditions dictate, Osteraas said.
Osteraas said he can't speculate on what the odds are that the plant would ever be switched over to gasified coal. It would hinge on the price and availability of coal and natural gas, and it would require a complicated analysis to determine what the breaking point would be, he said.
Coal or natural gas, Osteraas said there is going to be a need for new baseload power in the region, and possibly sooner than people realize. As evidence he pointed to the proliferation of wind farms, which, he says, require conventional power plants to back them up when the wind isn't blowing. A handful of large industrial projects proposed in northeastern Minnesota could drive up demand for electricity, he said. And new EPA rules for existing coal power plants could force some of them offline, he said.
"Since nobody's been doing anything for 30 years, there's going to be a need for new baseload power," Osteraas said. The Mesaba Energy Project is "about optionality for the state and providing alternatives that don't currently exist that can be in place in a fairly short time frame."
Xcel Energy's forecast doesn't contain the same sense of imminent risk as Osteraas' statements. The resource plan the utility filed last year for 2011 through 2025 described plans to continue investing in wind and hydroelectric power, as well as upgrade units at a Twin Cities power plant from 270 megawatts of coal generating capacity to 680 megawatts of natural gas capacity (Xcel didn't return a call for comment).
Despite resistance from local opponents, it's been economic forces and opposition from Xcel, the state's largest utility, which have kept the project from moving faster.
The political odds for the new bill are unclear. The legislation has been sent to the House and Senate energy committee, whose chairs didn't return phone calls last week. Gov. Mark Dayton supported the project as a U.S. senator, although he hasn't commented publicly on the project since becoming governor.
The company's attorney said the legislation isn't critical to the project. He said they would support having the option to consider natural gas, but that today they have four or five engineers continuing to focus on obtaining permits for the gasified coal facility. Osteraas said he hoped to have them complete within a year.
In November, departing IRRRB Commissioner Sandy Layman described the Excelsior project to a BusinessNorth reporter as "stalled out." The comment helped fuel speculation by opponents that Excelsior is running out of money and options.
Charlotte Neigh, co-chair of Citizens Against the Mesaba Project, said she believes if the session ends without the bill passing, the company will likely start to shut down.
That's something Sen. Tomassoni doesn't want to see happen. "I don't think you want the thing to die on the vine if there's a chance to make it work," Tomassoni said. "This is not a bait-and-switch. This is a response to what has gone on over the last nine years, and (about) trying to make the project work in a different way, as well as keeping the original intent of the project alive."
Dan Haugen is a Minneapolis-based freelance journalist who writes about business, technology and environmental issues.
CAMP Letter to the Editor
SENATOR SAXHAUG'S FAVORS FOR EXCELSIOR ENERGY
State Senator Ellen Anderson has called it "a bait-and-switch proposal" but it's just a business-as-usual proposal for Senator Tom Saxhaug. He is cosponsoring legislation to give Excelsior Energy, a private for-profit company, an unwarranted and unfair advantage over other new electric generating plants. If Senate File No. 417 becomes law, several special privileges for plants fired by natural gas (NG) will benefit Excelsior exclusively.
These privileges include granting Excelsior the power of eminent domain for plant sites, NG pipelines and high voltage transmission lines for multiple NG plants at three locations on the Iron Range. The bill would also grant Excelsior the unprecedented right to build several NG plants without a certificate of need, which is the way the Public Utilities Commission determines whether any such project is appropriate and necessary for the electric system. Saxhaug's bill would override protections for landowners and other public interests.
The bill would give Excelsior's NG plants special benefits that were legislated in 2003 for Excelsior's proposed coal-gasification technology, which was dubbed an "innovative energy project". Even then there were serious questions about whether the technology was truly innovative. There is no question now that NG-fired plants are not innovative. Excelsior's need for this bill is an admission that its heavily subsidized Mesaba Energy Project with its much touted technology has failed and its principals are desperately seeking some other way to fill their pockets.
Excelsior's argument for this bill will likely be that the possibility of converting to coal gasification in the future justifies calling it innovative. However, Excelsior's only achievement after nearly ten years has been to spend about $40 million in public funding on a failed project. Any promise for future conversion of a NG plant to coal gasification should be evaluated according to Excelsior's record. There is no reason to expect that a coal-gasification plant in northern Minnesota (where carbon dioxide sequestration is not feasible) will ever be attractive to private investors who have refused to take the risk despite generous monetary incentives from the federal government.
There is no justification for giving such preferential treatment to Excelsior's NG plants. Senator Saxhaug sponsored a tax exemption for the Mesaba Project in 2006 and supported another one in 2009, paving the way for this switch to NG. He has consistently supported Excelsior's maneuvers to escape the consequences of failing to make its interest and principal payments on the $9.5 million it received from the IRRRB. Why such special favors for a profit-seeking corporation from a senator who is supposed to be protecting the interests of the residents of his district?
Charlotte Neigh, Co-Chair
Citizens Against the Mesaba Project
February 24, 2011
MESABA PROJECT AGAIN SEEKING SPECIAL TREATMENT AT LEGISLATURE
New benefits for the Mesaba Energy Project (MEP) are in a bill introduced in the Minnesota Senate (S.F. 417) by Senators Tomassoni, Saxhaug, Senjem and Michel, and in the House (H.F. 618) by Representatives Beard, Dill and Fabian. The bills have been referred to the energy committees in both bodies.
S.F. 417 - 96 Kb pdf
H.F. 618 - 300 Kb pdf
The bills would amend Minn. Stat. 216B.1694 (the 2003 special legislation for an "innovative energy project") to allow the MEP to operate on natural gas (NG) rather than gasified coal. However, they also preserve the option of coal gasification in the future. Although the bills do not specify the size of the facility, Excelsior would have the right to build a "group of facilities" operating on natural gas on "up to three sites" without a certificate of need and with eminent domain power.
At a meeting on February 23rd IRRRB approved a four-year option agreement for Excelsior to purchase 225 acres along the Highway 169 corridor between Hibbing and Chisholm (Kitzville). Tom Micheletti reportedly said that he would run a couple of 600 MW plants on presently cheap natural gas with the capability of switching to "clean coal" as prices warrant. Excelsior already has a site and route permits for the Taconite site and a tentative purchase agreement for land near Hoyt Lakes, so the Kitzville land would complete the plan for three sites.
This is Excelsior Energy's effort to retain the statutory incentives for an "innovative energy project" (IEP) while changing the project to being fired by natural gas (NG), which is definitely not innovative by any reasonable definition. Excelsior's argument will likely be that the possibility of converting to coal gasification in the future justifies the IEP status and thus the incentives. CAMP disagrees with this rationale.
EFFECTS OF THE BILL
The proposed changes would have the following effects:
I. CHANGE DEFINITION OF IEP TO COVER A NATURAL GAS PLANT AND:
CAMPers SHOULD TELL THEIR LEGISLATORS
Excelsior Energy's only achievement has been to spend about $40 million in public funding on a failed project. Any promise by Excelsior for future conversion of a NG plant to coal gasification should be judged according to Excelsior's track record. There is no reason to expect that an IGCC plant in northern Minnesota (where CO2 sequestration is not feasible) will ever be attractive to private investors, who have refused to take the risk despite generous monetary incentives from the federal government.
Objections to the bill should focus on:
Air and Water Permits
Excelsior has been working with the PCA on air permits and with the DNR on water permits for its first coal-gasification plant. This work is preliminary to submitting final applications required to update the ones submitted in 2006. It will be interesting to see whether Excelsior finalizes these applications.
Excelsior Energy - Poster Child for Abuse of RDF
Excelsior's earlier grant of $10 million from the Renewable Develpment Fund was a topic of interest recently in hearings before the energy committees in the legislature. The committees were reviewing a report by the Office of the Legislative Auditor (OLA) regarding misuse of the fund that was intended to contribute to the advancement of renewable energy technologies in Minnesota. The legislators noted OLA's concerns (see our 12/4/10 update below) about the inappropriateness of the grant to Excelsior. A bill is expected to be introduced this session to tighten up RDF procedures and avoid a repetition of such inappropriate grants.
December 11, 2010
CALL FOR IRR REFORM
Recently a report on the Mesaba Energy Project (MEP) by a local TV station strangely concluded with the unattributed statement: "Governor Elect Mark Dayton is said to be on board with finding a way to help streamline projects like the Mesaba Energy Project so the permitting process is quicker." The report featured MEP booster State Senator Dave Tomassoni, who likely was the source of the unattributed statement.
There is no reason to believe that the advent of the Dayton administration will speed up the permitting process for the MEP, or that it would want to do that. The delay in the air and water permits results from Excelsior's having done nothing to pursue them between filing applications in 2006 and May 2010. Any permit will have to meet the standards of the Environmental Protection Agency, which will not be affected by the advent of the Dayton administration.
The resurfacing of Sen. Tomassoni is a reminder of how instrumental he has been in breathing life into the project and enabling it along the way. Among other things, he played a key role in the IRR's wasting $9.5 million. Without early IRR support the MEP likely would never have received any public funding, let alone the $40 million it has spent. This is why CAMP sent the following suggestion to the Dayton transition team: http://daytontransition.org/
CAMP Suggestion to Dayton - Reform IRR
Iron Range Resources is in serious need of reform. Cronyism and politics have led to squandering $9.5 million dollars meant to aid local government and school districts within the Taconite Relief Area.
The $9.5 million was recklessly paid out in support of an unlikely scheme to build coal-fired power plants on the Iron Range. Not surprisingly, Excelsior Energy's Mesaba Energy Project is now foundering, having spent all of the $9.5 million in addition to $20 million from the federal Department of Energy and $10 million from the Renewable Development Fund (also a questionable expenditure according to a recent report by the Legislative Auditor's Office).
In August 2010 IRR agreed to change the terms of its loan agreements with Excelsior rather than declaring it in default although Excelsior missed all its deadlines for interest payments since April 2007 and for its principal payments starting in December 2009. These changes at IRR are done in secret: they are discussed and decided at non-public committee meetings and then rubber-stamped without meaningful discussion at the public meeting.
This lax enforcement of the terms of the loans has occurred repeatedly. The original agreement in 2001 for $1.5 million was conditioned on Excelsior's providing millions in funds from the private sector. The $1.5 million was paid out despite the lack of any matching funds; IRR acknowledged that "The company was not able to attract equity investors or in-kind contributions".
Excelsior has never been able to entice investors. It's founders, cochairs, principals and only two shareholders - Tom Micheletti and Julie Jorgensen (married couple) - invested only $60,000 when they formed the corporation in 2001. Although they were not permitted to pay themselves salaries out of the IRR funds, they used the IRR funding as leverage to get DOE funding and then started paying themselves each $300,000/year retroactively. They are not personally liable for debts of the corporation.
The requirement for annual audited financial statements was not enforced until 2004, when IRR agreed to give Excelsior an additional $8 million despite its inability to meet the terms of the first loan agreement for $1.5 million.
We know this information because we conducted a data search at IRR late in October 2007 pursuant to the Minnesota Data Practices Act. That resulted in embarrassment to IRR, including an investigation by the Legislative Auditor's Office. It was no coincidence that in May 2008 Sen. Tom Bakk used his position as chair of the Senate Tax Committee to slip a last-minute amendment into the omnibus tax bill, effectively exempting financial information relating to applicants and recipients of IRR funding from the Data Practices Act. Now no one can scrutinize and discover these outrageous practices.
Reforming IRR is a natural and obvious fit for this administration's promise to eliminate waste and use available resources more effectively.
December 9, 2010
On December 8th Excelsior Energy sent out a statement to the media, purporting to correct recent news articles regarding the downgrading of the Mesaba Energy Project by the Department of Energy. This response by CAMP has been sent to media contacts.
CAMP's RESPONSE TO EXCELSIOR'S CLAIM
Excelsior's claim that only projects that have not yet achieved a Final Environmental Impact Statement (FEIS) are on the Department of Energy (DOE) chart is not accurate. If that were so, the Mesaba Energy Project (MEP) would not have remained on the chart for 12 months after its FEIS in November 2009. It is true that on the November 2010 chart the four projects listed in the "fossil energy" category have not yet achieved an FEIS. But a project in another category shows an FEIS in August. Similar examples can be found in prior months over recent years.
The significance of the removal of the MEP from the chart is that DOE is not expecting any progress beyond the FEIS for the foreseeable future. This is an unusual action by the DOE; CAMP's contact said the anticipated lack of progress is due to the lack of permits and the lack of a power purchase agreement. Both of these requirements are critical in DOE's assessment of whether Excelsior successfully completes Phase I under the cooperative cost-sharing agreement, for which DOE has paid out nearly all the promised $22 million and which was supposed to be done by April 2008, but the time has been extended. The remaining $14 million is not available until after the plant is operating, and is to demonstrate its ability to use various fuels. Without a Record of Decision, the Mesaba Project is stalled out at DOE and DOE is signalling that it doesn't expect any change in the foreseeable future.
CAMP's announcement made it clear that the chart was for key environmental impact statements. This was the context in which the exchange took place with the DOE contact. The question after November 2009 was when the DOE would be issuing the Record of Decision to conclude Mesaba's environmental process. The ROD is the final step. The monthly chart shows the status of the projects starting with the Advance Notice of Intent (ANOI), through Notice of Intent (NOI), Draft EIS (DEIS), Final EIS (FEIS), and ending with the Record of Decision (ROD). The charts can be found at:
Over recent years the charts have shown that from the time a date is projected for the FEIS, a date is also projected for the ROD. After the FEIS is done, the project remains on the chart showing when the ROD is expected, usually within a few months. Mesaba's case was unusual because after the FEIS was issued in November 2009 the schedule repeatedly showed "ROD schedule uncertain" instead of an estimated date. A DOE response to an earlier inquiry indicated that the ROD was delayed because of the lack of permits. Excelsior needs air and water permits before it can construct or operate the facility.
A March 2010 inquiry to the Minnesota Pollution Control Agency established that Excelsior had not updated its applications for air and water permits since 2006 and that the air permit application "will likely have to be newly submitted to meet new program policies". In May 2010 Excelsior initiated contact with the MPCA to update its air permit application. The MPCA has been reviewing modeled emission rates and sent some preliminary comments to Excelsior and received some responses. That was the most recent update in November 2010. As of August there had been no contact regarding water permits.
Record of Decision
The decision DOE has to make in order to conclude this phase of the project is whether or not to follow through with its preferred alternative, as contemplated at the time of the initial funding for the project. On pages 4 and 5 of the Summary section of the FEIS it states (emphasis added):
"DOE's preferred alternative is to provide financial assistance in the form of co-funding under the CCPI cooperative agreement and possibly a loan guarantee under Title XVII of the EPAct 05 to the Mesaba Energy Project, assuming that one of the two sites proposed by Excelsior (see below) would be found acceptable and granted a site permit by the Minnesota Public Utilities Commission (PUC). DOE tentatively finds both sites to be acceptable. DOE does not have a preference among the alternatives considered for utility and transportation infrastructure necessary to support the project. These routing decisions are also under the jurisdiction of the PUC in its permitting process. If DOE ultimately selects the preferred alternative, DOE would then determine for each site whether mitigation of specified potential impacts would be required. DOE is also free, however, to ultimately determine in the ROD that only one of the two sites is acceptable, or to select no action.
No Action Alternative
Under the No-Action Alternative, DOE would not provide cost-shared funding or a loan guarantee to the Mesaba Energy Project to demonstrate the commercial readiness of the Conoco-Phillips E-Gas™ gasification technology in a fully integrated and quintessential IGCC utility-scale application (beyond funding required to complete the NEPA process). DOE assumes that if Excelsior were to proceed with development in the absence of DOE funding or loan guarantee, the project would include all of the features, attributes and impacts as described for the Proposed Action. However, without DOE participation, it is possible that the proposed project would be canceled. Therefore, for the purposes of analysis in this EIS, the DOE No Action Alternative is assumed equivalent to a "No Build" Alternative, meaning that environmental conditions would remain in the status quo (no new construction and no change in localized resource utilization, emissions, discharges, or wastes generated)."
December 4, 2010
MESABA'S FUNDING QUESTIONED AGAIN - $10 MILLION FROM RDF LIKELY IMPROPER
The Mesaba Energy Project (MEP) has once again come to the attention of the Office of the Legislative Auditor (OLA). The first time was OLA's embarrassing 2008 review of how Iron Range Resources supervised the $9.5 million it gave to Excelsior. This time it is part of an evaluation of the Renewable Development Fund (RDF), from which Excelsior extracted a $10 million grant thanks to the 2003 legislation providing special benefits for this project.
The RDF is funded by Xcel Energy's customers and is meant to contribue to the advancement of renewable energy technologies in Minnesota. The 2003 legislation authored by Sen. Tomassoni (also instrumental in the IRR funding) said that the MEP was entitled to a grant of $2 million a year for five years. Management of the RDF decided against a grant for the MEP but was overruled by the Public Utilities Commission (PUC). The $10 million has been paid out and reportedly spent by Excelsior on engineering and permitting costs.
Of particular interest to CAMPers are the points relating to the MEP:
OLA's report is a comprehensive look at the RDF, identifying problems and policy considerations, and suggesting solutions, which would have to be incorporated into new legislation. The 4-page summary and the 99-page report can be found at: http://www.auditor.leg.state.mn.us/PED/2010/rdf.htm
November 26, 2010
DOE DOWNGRADES MESABA PROJECT
The Mesaba Energy Project (MEP) has disappeared from the Department of Energy's November posting of key projects. The chart showing the status of key environmental impact statements is posted monthly and for five years it has included the MEP. Since the final environmental impact statement was released in November 2009, the schedule has indicated that the timing for the final step, the Record of Decision (ROD), is "uncertain".
An inquiry to our contact at DOE got this response:
I think that the definition of "key environmental impact statements" has to do with those EIS's that are being tracked by DOE Headquarters as documents that may require some activity by HQ in the foreseeable future. Since the ROD schedule for the Mesaba Energy Project is uncertain and has been for some time, it is not being actively tracked by HQ on this chart. . . . I think that it still has to do with the status of the permitting process (air and water) and arrangements for purchase of the power that would be generated by the project. . . .
Significantly, this is the first time our DOE contact has acknowledged that the lack of a power purchase agreement is an impediment to the ROD. More importantly, apparently DOE does not expect the MEP to overcome the serious obstacles to its progress, and so DOE is lavishing its attention and largesse on competing projects.
Another commercial-scale, coal-gasification, energy project is receiving substantially more federal funding than the MEP did and it is moving along. The 600 MW project in West Texas claims it will capture 90% of the CO2 emissions, which could be sold locally for enhanced oil recovery. Two other fossil fuel projects intended to capture and sequester significant amounts of CO2 are also receiving substantial funding and making progress. One of them is FutureGen, which previously was intended to build on technology demonstrated by the MEP; in its reconfiguration as FutureGen 2.0 it does not need any trailblazing from the MEP.
These developments support CAMP's earlier conclusion that Excelsior Energy is not likely to receive any more federal funding for its misbegotten MEP. As it is even less likely to receive any other public funding or private investment, we expect it will fade away when the initial DOE funding is exhausted, which could be soon.
IRON RANGE RESOURCES SECRETS PROTECTED
Once again we have discovered that Senator Tom Bakk abused his position as Chair of the Senate Tax Committee to benefit the MEP. At the end of the legislative session in 2008 he slipped a provision into the omnibus tax bill that exempts IRR's information relating to loan recipients from the state's Data Practices Act. This means that we can't do anything about IRR's refusal to respond to our inquiry into the reasons for and the details of the IRR's August action writing off tens of millions of dollars owed by Excelsior Energy. It also explains why other investigative efforts have led nowhere.
Three years ago CAMP did a comprehensive data search at IRR that in 2008 resulted in embarrassing revelations about the $9.5 million it was wasting on the MEP, including an investigation by the Legislative Auditor. Rather than correcting its irresponsible ways, IRR managed to shutter the window that let the sun shine in. IRR's history of questionable practices make it an exemplar of the need for public scrutiny of a government agency and Bakk's legislative trick should be reversed.
Commissioner Layman: Excelsior Energy "stalled out"
We got a peek into IRR's opinion of the MEP in BusinessNorth's recent interview with departing Commissioner Sandy Layman. Regarding Layman's tenure and accomplishments, Beth Bily wrote:
Not all ventures, however, have proved successful. Despite $9.5 million in loans and backing from IRR, Excelsior, a proposed West Range coal gasification project looks elusive, at best. Excelsior's proposal is embattled on a number of fronts, but perhaps most notably for the high cost of the power it would produce.
Nonetheless Layman thinks it's not a bad overall track record.
"They were all high risk projects (at the outset) but Excelsior Energy is really the only one that's stalled out," she said.
Apparently IRR understands that the MEP is going nowhere. CAMP will try to assure that there is no future confusion about that.
August 21, 2010
IRR WRITES OFF $ MILLIONS OWED BY EXCELSIOR ENERGY
By failing to declare Excelsior Energy in default, which would put an end to the Mesaba Energy Project, the Iron Range Resources Board is enabling Excelsior to draw down the remaining $2.3 million of Department of Energy funding, which can continue to provide handsome salaries for Tom Micheletti and his wife and co-president, Julie Jorgensen.
In April 2007 Excelsior Energy defaulted on its $952,376 interest payment on loans from IRR and it hasn't paid any interest yet. Since then interest has been accruing on $9.5 million at the rate of 20% per year and the annual payments should be about $2 million. In addition, Excelsior was supposed to pay $800,000 per year on the principal, starting in December 2009, which it also failed to do. After repeated extensions of the due date, payment was supposed to be made by December 2010.
However, at a non-public meeting on August 10th, an IRR committee discussed Tom Micheletti's proposed changes to the terms of the loans and the IRR Board rubber-stamped these amendments at its meeting on August 19th. From the limited information available, it can be determined that: the annual principal payment will start in December 2010 and will be reduced from $800,000 to $100,000; the interest will be calculated at the reduced rate of 5% instead of 20% and annual payments are not required; and if Excelsior pays off the entire principal by 12/31/17, the interest rate will be recalculated at 3% per year. This amounts to a loss of revenue to IRR well in excess of $10 million, in addition to the $9.5 million that probably never will be repaid.
The high initial interest rate reflected the risk level of the Mesaba Energy Project, which has been borne out by Excelsior's failure to attract investors or customers. This is despite having spent nearly 40 million public dollars, including approximately $20 million from the federal Department of Energy and $10 million from Minnesota's Renewable Development Fund, in addition to IRR's $9.5 million. Tom Micheletti did not offer the IRR Board any revised plan for making this project succeed. When the remaining $2.3 million is gone, Excelsior can declare bankruptcy without assets to repay its creditors, and its co-presidents can walk away.
Micheletti touts the accomplishment of a final environmental impact statement but that process has not been finished because it still lacks a Record of Decision by the DOE. Micheletti touts the accomplishment of having the site approved by the Public Utilities Commission but fails to mention that the project cannot proceed without required regulatory permits. The air permitting has been delayed since 2006 and is problematic because this project is competing with mining operations that can't be located elsewhere for scarce space for more pollutants in the airshed.
Sensible people must wonder why the IRR Board would do this, or why it would have funded this project in the first place, or why it would have waived the requirement for matching funds, or why it would have extended the due date for payments while it continued throwing good money after bad. A likely factor is the generosity of Excelsior insiders at campaign fundraisers for some of these legislators the week before the committee meeting and over recent years.
FEIS NOT ACTUALLY "FINAL": AIR AND WATER PERMITS LACKING
The final step for the environmental impact statement (issued in November 2009) is a "record of decision" (ROD) prepared within the DOE, vouchsafing that all has been done thoroughly and properly and the project should be allowed to proceed with DOE support. However, the ROD has been delayed and the monthly reports indicate "schedule uncertain". We don't know all of the reasons for this but they may include concerns previously raised by the EPA, the Army Corps of Engineers and the federal land managers. One of the known reasons is Excelsior's failure to acquire the necessary air and water permits from the Minnesota Pollution Control Agency (MPCA). Apparently Excelsior continues to qualify for cost-sharing contributions from the $22 million DOE fund ($2.3 million remaining) while it pursues these permits.
Excelsior is not actively pursuing water permits at the MPCA; if there have been any changes since the June 2006 applications, revised applications will be required. In late spring Excelsior contacted the MPCA regarding the air permits and work is currently underway to determine what updates to the 2006 applications will be required. It appears that no draft permit will be issued in the foreseeable future and if one ever is, it can be appealed to the EPA, a process that could take 18 months.
We will keep CAMPers posted on any developments about the permits.
WHO WOULD BUY MEP'S OUTPUT?
There was no appeal from the decision of the Court of Appeals that upheld the PUC's denial of the power purchase agreement with Xcel Energy, and so that decision is final.
ln April 2009 we reported that Excelsior was trying to entice municipal utilities to invest in the Mesaba Project. We sent information to many of them warning of the pitfalls. Now some investor-owned and municipal utilities, including Nashwauk, Elk River, Willmar and communities in Wisconsin, have formed a Resource Planning Coalition. They are looking to supply an aggregated "need" of up to 700 MWs over 30 years, including both long-term purchases and project-owning opportunities. Nashwauk's need is driven primarily by its desire to service the Essar taconite plant and steel mill, which initially was to come from existing sources but a supplemental EIS is in progress, which may reflect changes in that plan.
The search for new long-term sources has been spurred by the demise of the Big Stone II project, which involved some of these same utilities. BS II and Mesaba were the only two projects exempted from the moratorium on new coal plants enacted by the Minnesota legislature, so it is not likely these utilities will discover any inexpensive power source for their future needs.
CAMP will reach out to educate this group of utilities about the perils of the MEP.
FutureGen CANCELLED - MEP'S COAL-GASIFICATION TECHNOLOGY OBSOLETE?
The MEP was touted as a step in the direction of generating electricity from "clean coal". The next step was to be the FutureGen project in Mattoon, Illinois, which was to use IGCC technology and actually capture and sequester the CO2. However, it has stalled repeatedly despite the influence of Senator Durbin and former Illinois Senator, now President, Obama because of escalating costs.
Earlier this month DOE Secretary Chu announced $1 billion funding for "FutureGen 2.0", which substitutes "a clean coal repowering program and CO2 storage network" for the original project. The plan is to convert a dormant oil-burning power plant in Meredosia, Illinois to one that uses a mixture of oxygen and CO2 to combust coal ("oxy-combustion"), to make capturing CO2 easier. Our expert tells us this old idea was rejected years ago because it is not efficient. However, it has a lower capital cost than IGCC with CCS and can be spun as a "clean" way of retrofitting existing coal plants, thus preserving the financial health of Big Coal while protecting politicians from difficult choices.
The claim is to capture 90% of the CO2, which was the original target of FutureGen that had to be reduced to 60% last year. The plan includes a regional CO2 pipeline network, starting with transporting CO2 170 miles to the former FutureGen site in Mattoon for storage. A glitch occurred however, when within one week of this announcement the local development group rejected the use of the site for this purpose. This caused Senator Durbin to proclaim that a number of other Illinois communities were very interested in replacing Mattoon's role in this project. We expect that when residents near any other targeted site learn about the risks, this interest may disappear.
With the announcement of FutureGen 2.0, Senator Durbin characterized it as "innovative technology that can serve as a model for the nation", while staying "true to the original goal of dramatically reducing pollution". This seems to be political-speak for abandoning coal gasification with CCS as the favored "clean coal" technology but until further clarification from DOE we can't be certain.
We will continue to keep CAMPers informed of developments.
May 20, 2010
COURT OF APPEALS UPHOLDS PUC DECISIONS
Click here for the full report released by the Court of Appeals. (164 KB pdf)
No PPA with Xcel
On May 18th a three-judge panel of the Minnesota Court of Appeals ruled that the PUC "did not err in concluding that Excelsior's proposed power purchase agreement with Xcel is not in the public interest". This means that Excelsior still doesn't have a customer for the power it wants to produce, and so the project is not attractive to investors.
Qualifies as an IEP
The court also ruled that there is substantial evidence to support the PUC's finding that Mesaba is an "innovative energy project" and therefore qualifies for the special legislative incentives.
The Final Word?
There is some reason to expect Excelsior to appeal this decision to the Minnesota Supreme Court. We'll know within 30 days.
Updated Air Permit Application
Excelsior is in the process of updating its air permit application submitted in June 2006. The Minnesota Pollution Control Agency (MPCA) expects to receive the revised application in June 2010.
The MPCA is likely to find it problematic to accommodate Mesaba's emissions (in addition to those anticipated from Essar's mining-to-steel project and Keetac's expansion) within the federal standards for pollution in the airshed.
Carbon Dioxide Counts Too
The federal Environmental Protection Agency has announced that, effective January 2011, permits for facilities such as the Mesaba Project will be required to include greenhouse gas (GHG) emissions along with other pollutants covered by the Clean Air Act. The project will be required to determine the Best Available Control Technology (BACT) for GHG emissions. The rule addresses six GHGs: carbon dioxide; methane; nitrous oxide; hydrofluorocarbons; perfluorocarbons; and sulfur hexafluoride.
March 4, 2010
MPUC - Permits for West Range Site and Routes for Natural Gas Pipeline and HVTL
At its regular meeting on March 4th the Minnesota Public Utilities Commission decided the following issues in the affirmative:
Given that this decision was limited to the question of whether the issues in the Scoping Decision were adequately addressed by the EIS and the record, the outcome is no surprise. The Scoping process and the EIS were carefully controlled and manipulated by the federal Department of Energy and the state Department of Commerce to avoid addressing the serious problems and concerns identified by a well-informed public and some government agencies.
Despite this development, the iffiness of building this Project remains great because it cannot find a customer for its output and so is not commercially viable or attractive to investors.
Additional hurdles include many permits from state and federal agencies, including:
We will demand that the government agencies charged with protecting the environment do their duty when they evaluate the appropriateness of granting these needed air and water permits.
Court of Appeals - PPA & IEP
A three-judge panel of the Court of Appeals heard oral arguments on February 23rd. Excelsior Energy is appealing the MPUC's denial of the Power Purchase Agreement with Xcel Energy, and Minnesota Power is appealing the PUC's determination that the Mesaba Energy Project qualifies for special regulatory and financial incentives because it is an Innovative Energy Project. Arguments were made by attorneys for Excelsior, Xcel, Minnesota Power and the MPUC. The judges' questions revealed that they had studied the case and were zeroing in on the key issues. They have up to 90 days to issue a decision.
February 12, 2010
MESABA ENERGY PROJECT: RECENT DEVELOPMENTS AND CURRENT STATUS
ORAL ARGUMENTS: PPA & IEP
Excelsior Energy's appeal of the PUC's denial of the Power Purchase Agreement with Xcel Energy will be argued before a panel of the Minnesota Court of Appeals:
Tuesday, February 23, 2010 at 11:30 a.m.
Courtroom 200, Minnesota Judicial Center, St. Paul
Judges: Francis J. Connolly, Matthew E. Johnson, Natalie E. Hudson
In addition to the PPA issue, the court will decide Minnesota Power's claim that the Mesaba Energy Project does not qualify as an Innovative Energy Project. The PUC rejected the ALJs' finding that it was not an IEP. This designation is the basis for the special incentives granted in the 2003 legislation, including: eminent domain authority; a power purchase agreement with Xcel Energy; and $10 million from the Renewable Development Fund. A determination that the Project does not qualify as an IEP would be a significant blow on both the state and federal levels. The panel has up to 90 days to render a decision.
ANY CAMPERS WHO ARE ABLE TO ATTEND THIS HEARING ARE REQUESTED TO LET US KNOW HOW IT GOES.
PUC: SITING AND ROUTING PERMITS
Minnesota's Office of Energy Security in the Department of Commerce has joined with the ALJ in recommending that pemits be granted tor the Scenic Highway site and the preferred routes for the natural gas pipeline and HVTL.
The PUC may decide this at its meeting on March 4, 2010. Given that the only party to this case is Excelsior Energy, we expect the PUC to grant these permits. However, the Project still needs air and water permits, which are more problematic, and most problematic, it needs a customer committed to purchasing its output.
EXCELSIOR FUNDING: RDF $10 MILLION
The administrator of the Renewable Development Fund has notified the PUC that the final $731,007.22 will be paid to Excelsior Energy by early March, exhausting the total $10 million grant.
Given that Excelsior has already used up the $9.5 million from Iron Range Resources, and phase one of the DOE's $22 million in funding has expired, no other funding source for the Project can be identified.
TELL YOUR ELECTED STATE AND FEDERAL REPRESENTATIVES THAT NO MORE MONEY OR FAVORS SHOULD BE WASTED ON THIS BOONDOGGLE.
December 30, 2009
ADMINISTRATIVE LAW JUDGE RECOMMENDS PERMITS FOR MESABA PROJECT AT SCENIC HIGHWAY SITE
In an 80-page report filed on December 28th, the ALJ recommended that the PUC grant Excelsior Energy's application for a Large Electric Power Generating Plant site permit, a High Voltage Transmission Line route permit, and a Natural Gas Pipeline route permit for the West Range Site. The final decision will be made by the Minnesota Public Utilities Commission.
You can download the report here: 12-28-09 ALJ Report
THE MEP STILL NEEDS AIR & WATER PERMITS AND A CUSTOMER
Even if the PUC grants the site and route permits as recommended, the Project still has the major problem of no one to buy its output. Without a committed customer, construction cannot be funded. The MPUC has denied Excelsior's attempts to force Xcel Energy or other utilities to buy its power. In coming months the court of appeals will be reviewing that decision as well as the issue of whether Mesaba qualifies as an Innovative Energy Project. A ruling that it is not an IEP would negate the special legislative, regulatory and funding benefits that have carried it this far.
The ALJ noted that "important considerations remain for the permitting agencies such as the MPCA, DNR, and the Army Corps of Engineers, which must determine the conditions to be imposed on the necessary environmental permits." As the ALJ states, "other issues must be resolved for the project to go forward" and his recommendations have meaning only if it is built.
SELECTING THE WEST SITE
The ALJ acknowledged that the site alternatives were severely limited because of the special legislation that required the Project to be within the Taconite Relief Area. He reasoned that the West Range site is a better option than the East Range site because:
CAMP POINTS OUT THAT:
NOT A DONE DEAL
As always, CAMP will continue to monitor developments and keep CAMPers informed. We will be watching for developments at the PUC, the court of appeals, and environmental agencies.
We will especially be alert for any new efforts to salvage this boondoggle during the upcoming legislative session and we wil let CAMPers know if they need to act.
Guest Commentary: Grand Rapids Herald Review
November 19, 2009
Mesaba Energy Project's Future Remains Grim Guest CommentaryExcelsior Energy's recent press release on the Final Environmental Impact Statement (FEIS) for the Mesaba Energy Project contains its typical optimistic spin, but as usual, Excelsior's position and reality are quite different. Excelsior's continued claims that the project is in the interest of national security and will have a beneficial impact on climate change are so ludicrous as to be in the realm of fantasy.
Despite this, and contrary to Tom Micheletti's public optimism in the Herald Review this week, the Mesaba Project's future continues to look grim at best. This project is in serious financial jeopardy and has been determined to not be significantly cleaner than other coal plants with state of the art emissions control technology. The FEIS also states quite clearly that Carbon Capture and Sequestration (CCS) is not feasible for this plant, so the DOE would allow Mesaba to spew 5 million tons/year of carbon dioxide into the atmosphere.
Public comment on the initial Joint Permit Application and Draft Environmental Impact Statement was supposed to ensure that the FEIS is complete, and to identify areas of local concern. Instead, it appears that the DOE spent almost 2 years whitewashing the problems. Although this is disappointing, it is not surprising as the DOE has been openly and publicly supportive of the project. It seems the overall objective of this document is to minimize the adverse environmental impacts and push a federal policy for "clean coal". Having the DOE be the lead agency on the FEIS is very much like allowing the fox to guard the henhouse.
Even with a boost from this sham of an environmental impact statement, Excelsior will still need to deal with obtaining the numerous permits required to build and operate this plant. Comments from agencies such as the Army Corps of Engineers and the Minnesota Pollution Control Agency show that Excelsior still faces significant problems in moving forward. Excelsior Energy has done a poor job of anticipating permitting needs from the start, beginning with the initial site selection on the East Range. It changed the "preferred site" to the West Range to avoid implementing expensive pollution control measures for discharged water, and because it finally realized air permits would be difficult if not impossible to obtain on the East Range. Since then, Excelsior has been forced to use the same expensive control technology at the West Range, and permitting is still problematic.
Even if Excelsior is somehow able to solve the permitting problems, it still needs investors. This project needs dollars to move forward; BILLIONS of dollars. The Public Utilities Commission has denied Excelsior a mandated buyer. Excelsior's recent appeal of the PUC decision does nothing more than allow them to stay alive just a bit longer and eat up more public dollars in the process. Excelsior also has a multi-million dollar interest payment to Iron Range Resources due next month, and this amount is increasing at over a million dollars per year.
Excelsior Energy has repeatedly shown an inability to anticipate basic environmental problems and permitting requirements. The reason for such lack of judgment and foresight is unclear, but likely is related to the fact that the principal players are lobbyists, not engineers. They succeeded in obtaining legislative favors, public start up dollars, and numerous other perks several years ago. However, they've shown time and again that they struggle outside the political arena and are unable to properly design, site, market, and fund this project. Lobbying may be their strength, but execution of a plan and realization of this project is another matter altogether.
Ed Anderson, Co-Chair
Citizens Against the Mesaba Project
November 18, 2009
Citizens Against the Mesaba Project Action Group
The Final Environmental Impact Statement (FEIS) for the Mesaba Energy Project has been released after repeated delays.
It consists of 3 volumes totaling about 2100 pages. Segmented volumes can be found on the links below and from the Take Action page. The volumes in their entirety can be downloaded from the links to the left and on the DOE website: http://www.gc.energy.gov/NEPA/1167.htm.
The Administrative Law Judge in the Siting Docket is accepting comments regarding the adequacy and impact of the FEIS.
Information for submitting comments from Bill Storm of the DOC: The public will also have until Wednesday, December 2, 2009, to submit written comments to the ALJ on the adequacy of the FEIS.
Written comments should be mailed to:
Steve M. Mihalchick, Administrative Law Judge
Minnesota Office of Administrative Hearings
PO Box 64620
St. Paul, Minnesota 55164-0620.
Comments may also be emailed directly to Judge Mihalchick at firstname.lastname@example.org
Judge Mihalchick has informed us that comments must be received by 4:30 pm December 2nd, 2009.
CAMP is in the process of reviewing and commenting on the FEIS. Anyone willing to help will be greatly appreciated. If you would like further help or guidance in preparing comments please contact us at email@example.com
September 18, 2009
FEIS DELAYED AGAIN
Despite rumblings from DOE that Mesaba's Final Environmental Impact Statement would likely be released in September, the latest schedule says October. CAMP's team for review and comment was on standby and can now stand down at least until October. We are not holding our breath.
MINNESOTA POWER CHALLENGES MESABA'S STATUS AS AN IEP
The Minnesota Court of Appeals has an additional issue to consider as it reviews the PUC's denial of Excelsior's power purchase agreement with Xcel. In order to qualify for the special incentives in the 2003 legislation, Excelsior needs to be an "innovative energy project". The Administrative Law Judges found that Excelsior did not qualify as an IEP. The Public Utilities Commission disagreed and ruled that Excelsior did qualify as an IEP. Minnesota Power took exception then and now has raised this issue in the case to be decided by the appellate court.
The court has scheduled principal and reply briefs to filed by late November. After that the case will be scheduled for oral argument.
August 9, 2009
EXCELSIOR FILES APPEAL FROM PUC'S DENIAL OF PPA
Excelsior Energy is asking the Minnesota Court of Appeals to overturn the Minnesota Public Utilities Commission's rejection of Excelsior's attempt to force a power purchase agreement on Xcel Energy.
Excelsior is making lots of legal arguments that boil down to a claim that the PUC: should have approved the PPA as the special 2003 legislation intended; and should not have considered whether the project is needed, or is in the public interest, or is in the wrong location. Hard row to hoe?
It will be interesting to see whether Minnesota Power will raise the issue of whether Mesaba qualifies as an innovative energy project. If the court determines that Mesaba is not an IEP, it would not be entitled to all of the special incentives granted by the 2003 legislation. These included the PPA with Xcel, an exemption from a certificate of need, and $10 million from the Renewable Development Fund.
You can download a pdf file of the court documents here: Excelsior Appeal-500 KB pdf
FEIS DELAYED AGAIN
DOE now says the final environmental impact statement will not be released before mid to late September. That makes it one and one-half years later than the original target of March 2008. Insurmountable problems?
July 18, 2009
SENATOR FRANKEN NEEDS TO HEAR FROM CAMPers
At recent parades across the Iron Range, Sen. Al Franken was lobbied by at least one Iron Range legislator on behalf of Excelsior Energy's Mesaba Project. The Project probably is hoping for a new lifeline of funding from the federal government. This likely would be related to developing and demonstrating carbon capture and sequestration (CCS), which is what allegedly makes coal "clean".
The previous federal incentives obtained by Excelsior were largely due to the efforts of Sen. Coleman. Sen. Franken seems to think that the possibility of reducing carbon emissions through IGCC technology and CCS should be explored. However, he has publicly stated that the Mesaba Project is in the wrong place for CCS.
Sen. Franken needs to be encouraged in his view that Mesaba is not suitable for demonstrating the viability of IGCC with CCS, and reminded that there is significant and well-founded opposition among area residents for various reasons. Pick your favorite one(s) and tell Sen. Franken:
Sen. Al Franken
320 Hart Senate Office Bldg
Washington, DC 20510
While you're at it, please tell Sen. Amy Klobuchar:
Sen. Amy Klobuchar
Olcott Plaza, Suite 105
820 9th St N
Virginia, MN 55792
main: (218) 741-9690
fax (218) 741-3692
302 Hart Senate Office Bldg
Washington, DC 20510
main (202) 224-3244
fax (202 228-2186
toll free (888) 224-9043
E-mail via her website: http://klobuchar.senate.gov/emailamy.cfm
NEED A FRESH CAMP LAWN SIGN?
Some of those CAMP signs around the county are looking a little worse for wear so we're providing new signs to people who would like them. Please email us at firstname.lastname@example.org or at email@example.com and we'll arrange a delivery or pick-up. Any ideas for recycling those old signs would be appreciated.
MORPHING MESABA PROJECT & BACKROOM DEALS
For reasons not yet revealed, Excelsior Energy is interested in building 100 MW natural gas plants instead of the fabulous, "clean"-coal gasification plant it has been touting for eight years. This is the purpose of an amendment that was passed surreptitiously in the last legislative session. The following letter was published in the Grand Rapids Herald Review and an abbreviated version was broadcast on KAXE.
We will continue trying to figure out what Excelsior is up to now. In the meantime, be sure to ask Senators Bakk and Saxhaug why they did this secretly.
CAMP LETTER TO THE EDITOR
In the recent legislative session Senators Saxhaug and Bakk did a favor for Excelsior Energy while ignoring local interests. Instead of following the usual transparent procedure, they quietly slipped in a provision at the last minute to give Excelsior a tax break.
Excelsior Energy doesn't want to pay personal property tax on its attached machinery, transformers, turbines and other equipment for the Mesaba Energy Project. If the plant is built at Excelsior's preferred site, this tax would be revenue for Itasca County, Taconite, and Greenway School District, and would likely be many times greater than Mesaba's real estate tax.
To avoid this tax, in 2006 Senator Saxhaug introduced a bill to give Excelsior an exemption. When the county commissioners found out about this attempt to deprive local government of tax revenue, they requested that the bill be amended to require negotiated payments in lieu of the tax. Senator Saxhaug amended his bill to do this. The commissioners passed a resolution in support of that bill but failed to hold a public hearing so that property taxpayers could voice their opinions about paying a greater share of the levy so that Excelsior can enjoy more profits.
In 2009 Excelsior wanted to amend this law so that the tax exemption would apply to changes in the project. Excelsior president Tom Micheletti says that he spoke with Senator Saxhaug about this. Excelsior lobbyist Kathi Micheletti says that she "talked multiple times to Saxhaug" about the changes Excelsior wanted. Despite the legal requirement that the exemption must be approved by the county board, nobody consulted the county before the amendment was passed. Senator Saxhaug did not even inform the county when he presented a report to the commissioners after the end of the session.
Normally, such changes are made by introducing a bill, which gives notice to the public. The bill is presented in committee hearings for open discussion and response to any questions or concerns. In this instance, no such bill was introduced and no hearings were held. In the rush and confusion during the last week of the session, Senator Bakk used his position as chair of the tax committee to bury 23 lines in a 198-page bill he presented on the floor of the Senate, achieving Excelsior's desired result.
Excelsior's lobbyist says that she also talked to Senator Tomassoni and Representatives Dill and Rukavina before the amendment passed. Notably missing from those who were informed is Representative Anzelc, whose district includes the preferred site for the project, and who has raised serious concerns about it.
Why such secrecy? Did Excelsior fear that its new scheme could not get enough votes? What is the effect of this amendment on the project, local government, and taxpayers? Why such special favors for a profit-seeking corporation from a Senator who is supposed to be representing the interests of Itasca County and another who wants to be our Governor?
MESABA FEIS DELAYED AGAIN
Latest word from DOE: Mid to late August, at the earliest. We'll keep you posted.
June 26, 2009
A TRIBUTE TO BOB NORGORD: 1942 - 2009
May 28, 2009
EXCELSIOR ENERGY'S ATTEMPT TO FORCE PPA ON XCEL DISMISSED BY PUC!
It took twenty minutes on May 28th for the Minnesota Public Utilities Commission to vote unanimously to finally deny Excelsior's proposed power purchase agreement with Xcel and to close the case. This triggers the start of the time for filing an appeal with the courts, which Excelsior has vowed to do.
Excelsior's final efforts included motions to suspend the docket indefinitely and to supplement the record by providing more evidence. Excelsior's previous petition for reconsideration of the denial of Phase 2 of the PPA was also on the agenda.
In unanimously voting against Excelsior on all three issues, two Commissioners made interesting comments, hoping that Mesaba will survive this blow:
Tom Micheletti says an appeal will be taken to the courts to show that the PUC misinterpreted the statutes that entitled Excelsior to a PPA with Xcel. Another likely issue will be whether Mesaba qualifies as an Independent Energy Project (IEP), which is what entitles it to special treatment. The ALJ s said no, the PUC said yes, and Minnesota Power has preserved this issue for appeal. Another likely issue will be whether the statute that requires Xcel to purchase 2% of its power from Mesaba expires at the end of 2011; the ALJ and the PUC said it does and Excelsior preserved that issue for appeal.
SITING DOCKET - FINAL ENVIRONMENTAL IMPACT STATEMENT
The DOE still has Mesaba's FEIS scheduled for release in June. Our contact at the DOE says it won't be before late June and that he will know better by mid-June whether it will be released in late June.
CAMPers will have to swing into action to provide comments to the ALJ on the FEIS in the docket that will decide on siting and routing permits. The volunteers who performed so well on the Draft EIS will be notified when the time comes.
April 22, 2009
Citizens Against the Mesaba Project Action Group:
Excelsior Courting MN's Municipal Utilities: Recently, Excelsior Energy launched a campaign to entice municipal electric utilities to invest in the Mesaba Project. Excelsior's negotiations for a Power Purchase Agreement with Xcel Energy have failed, so this is a plan B approach. While it seems doubtful that the municipalities will take the bait, CAMP has prepared and sent an informational bulletin of its own to alert these organizations of the Mesaba Project's risk. The following letter went out to over 300 email addresses across the state. We invite you to take a look at it. CAMP also issued a News Release which can be read under the News Releases Tab.
FEIS update: the FEIS (Final Environmental Impact Statement) for the Mesaba Project has been delayed from April until June.
CAMP's Letter to MN's Municipal Utilities:
TO: PERSONS RESPONSIBLE FOR MUNICIPAL UTILITIES
FROM: CITIZENS AGAINST THE MESABA PROJECT*
RE: EXCELSIOR ENERGY'S SALES CAMPAIGN
Excelsior Energy has been providing questionable information to municipal electric utilities to entice them to purchase an ownership interest in Mesaba Unit I - a coal gasification power plant proposed to be built on the Iron Range. Excelsior is turning to the municipals after its attempt to force a power purchase agreement with Xcel Energy failed because of its excessive risks and costs. Municipals seeking new sources of baseload power should carefully examine Excelsior's claims in light of findings made by the MPUC and the administrative law judges (notes below), and in the context of likely limits on greenhouse gas emissions and reluctant financial markets.
*CAMP is a grassroots organization of volunteers who have studied the Mesaba Project and provided information to the DOE, MPUC and the public since spring 2006. More information can be found throughout this website.
FEDERAL LOAN GUARANTEES
Although Excelsior's sales pitch suggests that 73% of the total Project cost will be covered by loans guaranteed by the federal government, it should be noted that:
Municipal utilities should carefully assess the likelihood that any loan guarantees at all will be awarded for the Mesaba Project.
More information and analysis about the federal loan guarantees can be found by scrolling down to the CAMP Update: October 8, 2007 entry.
COSTS & RISKS
NOTES (Italics added)
PUC ORDER 8/30/07 - Docket No. 05-1993: http://www.puc.state.mn.us/PUC/index.html
"The overriding reason that the Commission cannot find the terms and conditions of the proposed contract to be in the public interest is that the terms and conditions as to price impose excessive risks, and are likely to impose excessive costs, on Xcel and its ratepayers". (p. 14)
"The rate is totally dependent upon costs that are not yet known and that will be incurred to design and install a developing technology that is still commercially untested and has no long-term track record upon which the Commission can rely. . . credible evidence that rates will be 30% higher than rates for a comparable product (supercritical plants) . . . " (p. 16)
". . . (I)ncluding carbon dioxide in the emissions considered required a finding that the plant had 'little or no quantifiable advantage at this time over other coal burning plants and no advantage over baseload generators operating on renewables' (ALJ Finding 152). The Commission concurs that the plant has little advantage over the solid fuel baseload technologies likely to be deployed today." (p. 23)
ADMINISTRATIVE LAW JUDGES FINDINGS & RECOMMENDATIONS - 4/12/07
Finding 78. ". . . (C)apacity price . . . is based largely on the Engineering, Procurement, and Construction (EPC) contract cost. . . . It is likely to be larger by some unknown amount when it is fixed."
Finding 86. "Excelsior Energy has no coal or petroleum coke supply or transportation commitments at this time to hedge against future cost increases, nor does it anticipate beginning to negotiate any for another three to four years."
Finding 87. "When Excelsior Energy does start negotiating its agreements, it may have problems developing long-term commitments with fuel suppliers . . . (that) will need to expand to meet (increasing demand) and will not rush to provide low prices. Likewise, there is projected to be a continuing shortage of rail capacity for the delivery of coal for the foreseeable future. The large coal producers and railroads have large market power . . . . Excelsior Energy may have considerable difficulty obtaining fuel at favorable prices."
Finding 115. ". . . Xcel's ratepayers will have to bear rate increases totaling between $250 million to $365 million during the Project's first year of operation, resulting in electric rate increases for Xcel customers in the range of 5.9 to 9.6 percent . . . A representative commercial or industrial customer would experience increases ranging from approximately $2,700 to $3,900 per month."
Finding 116. "There will be transmission service network upgrade costs that will be required for interconnection of the Project to Xcel's system."
Finding 152. ". . . (T)here is some evidence that CO2 capture will be more possible with the IGCC technology used by the Project. The capture will theoretically be less difficult because it can be done in the syngas coming from the combustion of the coal in the gasifier. But there is some evidence that a similar process can be used on the flue gas coming from a CFB combustor, so IGCC may have no great advantage in this regard. More importantly, Excelsior Energy does not plan to install this technology on the Project until it is required by law to do so. If and when it is, Excelsior Energy plans to install a system that removes 30% of the CO2, and, if it is ever feasible, one that removes 90%. It is not known how those reduction levels will compare to retrofitted or other new coal-fired plants. Thus, the Project has little or no quantifiable advantage at this time over other coal burning plants and no advantage over baseload generators operating on renewables.
Finding 169. "Excelsior's cost estimates for the TECC (target EPC contract cost) were made using third-quarter 2005 data. The costs for coal power plants have risen since that time. Big Stone II updated their third-quarter 2005 cost estimate for plant construction based on 2006 data and found an increased plant cost of approximately 25% per MWh. It is likely that the Project's EPC cost will increase significantly."
Finding 183. "The levelized costs calculated by Dr. Amit (MN Dept of Commerce expert) . . . demonstrate that a PPA for the Project's preferred West Site would cost Xcel Energy and its ratepayers about 30 percent more than capacity and electricity from other comparable sources."
Finding 185. " . . . (T)he cost of equipment needed to capture some CO2 at the Project is approximately $472.3 million in 2011 dollars. The cost of a pipeline necessary to transport captured CO2 from the plant to the depleted petroleum wells in Alberta, Canada . . . is approximately $635.4 million in 2011 dollars . . estimated levelized cost . . . additional $50.02 MWh . . .
STANDARD & POOR'S
Investors warned against coal-to-gas power plants
By JEFF MONTGOMERY, The News Journal
Posted Wednesday, May 16, 2007
A proposal to build a coal-to-gas power plant in Delaware was dealt another blow Tuesday, this time by Wall Street.
One of the world's top credit rating agencies cautioned that next generation coal gasification power plants remain unproven and a "clear risk" to investors, a position that could raise questions about the financial viability of a proposed coal-to-gas plant here.
The warnings were part of a wide-ranging report by Standard & Poor's on the financial risk that climate change poses to financial markets, investors and industries. . . .
"The risk is immediate and clear, in the sense that the technology is unproven and it's not clear how well they would run three years from today," said Swami Venkatraman, a utility analyst with Standard & Poor's. Gasification developers are likely to have trouble even getting firm construction prices from builders, Venkatraman said. . . .
"We are more confident that climate change is happening, and we are more confident that it will be of significant cost, but the cost of remediation remains very uncertain because we don't have the technology yet,"said Standard & Poor's Chief Economist David Wyss. . . .
Standard & Poor's assigns companies a credit rating based on their financial outlook and an assessment of risk they face. A lower credit rating raises a company's cost of borrowing money for a project.
A news release was sent to media outlets. You can find it under the News Releases Tab or download a copy in pdf format here.
March 3, 2009
"CLEAN" COAL PITCH TO GRAND RAPIDS CHAMBER OF COMMERCE
Partners for Affordable Energy - http://poweringourlives.com/
Using the pretext of promoting a "balance" of reliable, affordable and clean energy from a variety of sources, Partners for Affordable Energy (PAE) is part of a national campaign to convince state and federal government NOT to impose any restrictions on greenhouse gases.
PAE reported lobbying expenditures in Minnesota at least as early as 2002, doubling in 2006, and increasing six-fold to $240,000 in 2007. The total for 2008 is not yet available but PAE currently has two registered lobbyists, including a new Executive Director for Minnesota rather than continuing to operate out of the office of the Lignite Energy Council in North Dakota. Its current "Task Force Members", as listed in lobbying reports, are representatives of coal-burning utilities in Minnesota and North Dakota, and coal companies in North Dakota and Colorado.
PAE and a "coalition of Minnesota trade associations and organizations" commissioned an economic analysis of the impact of Minnesota's carbon reduction policies. Assuming unlikely and extreme changes in Minnesota law, the report (available on PAE's website) concludes "significant negative economic consequences for Minnesota's economy, industries and workers". PAE is using this report to alarm Minnesotans so that they will contact state legislators and object to mandatory greenhouse gas reductions and a cap and trade system.
American Coalition for Clean Coal Electricity - http://www.cleancoalusa.org/
A significant exception in PAE's membership roster of Minnesota entities is ACCCE. This national organization of 48 coal and utility companies spent at least $45 million in advertising in 2008 to convince us that "clean" coal is the solution to global warming. ACCCE also spent $125 million in nine months of 2008 lobbying congress to delay mandatory CO2 reductions until "clean" coal technology is available.
Center for American Progress Report
In December 2008 the Center for American Progress (CAP) issued a report - "The Clean Coal Smoke Screen", including the following points:
BOTTOM LINE FOR CAMPers
Be aware that this hard drive by Big Coal is a sign that they are increasingly desperate because the problems caused by coal-based electricity have been widely exposed and the mantra of "reliable, affordable and clean" does not stand up to informed scrutiny. Numerous states have rejected new coal plants and are working on lowering CO2 emissions. Momentum is building at the federal level for limiting CO2 emissions and making them expensive.
What To Do:
February 25, 2009
Luncheon speaker for Grand Rapids Chamber of Commerce - Christina Pierson, Executive Director, Partners for Affordable Energy.
Sounds reasonable but it is an organization to promote continuing use of coal to generate electricity. Its website - http://www.powerofcoal.com
A big turnout of CAMPers would send the message that such clandestine tactics are not fooling us and the Chamber's support for the Mesaba Energy Project is not shared by the community.
Monday, March 2 @ 11:45 a.m.
$11.00 at the door, no reservations required
MESABA FEIS DELAYED AGAIN
The final environmental impact statement that was originally scheduled for March 2008 has been delayed from February to April 2009. No one is revealing the problem(s), so we can only speculate that the serious water and air issues raised by the Army Corps of Engineers and the Environmental Protection Agency have not been adequately addressed.
We'll see if the report is released in April or delayed even further. It is a necessary step in the Minnesota process for permiting the site and the routes for the power lines and the gas line.
EXCELSIOR ENERGY LOOKING ELSEWHERE FOR CUSTOMERS
Without saying so, Excelsior apparently has abandoned hope of getting a power purchase agreement with Xcel Energy. Excelsior's people have been touting the Mesaba Project to municipal utilities in regional meetings organized by the Minnesota Municipal Utilities Association. The pitch is to get the Munis to buy a part ownership interest in the Project and to receive some MWs to distribute to their customers. It's hard to figure how a Project that the MPUC found to be too costly and too risky for Xcel's ratepayers could be a good deal for municipal customers.
Also, Excelsior reportedly has used its influence with a few Iron Range senators to get a meeting with Essar Steel Minnesota, presumably to convince Essar to use Mesaba's output and probably share in the cost of developing the Project. The Nashwauk PUC is supposed to soon be revealing which supplier(s) it is going to use for the power needed by Essar and CAMPers will be paying attention.
December 18, 2008
We've summarized the latest events and suggest an action at the bottom of the update.
IRON RANGE RESOURCES
CAMP UPDATE: "CLEAN" COAL DEMYTHOLOGIZED
October 21, 2008
CAMPers are not alone in questioning the feasibility of capturing and storing carbon dioxide that would be emitted by the Mesaba Energy Project.
Coal-fired power plants are one of the largest sources of CO2 emissions in the United States. In reaction to the growing concern about climate change, the U.S. Government Accountability Office (GAO) has examined the feasibility of CCS - CO2 capture and storage - from large-scale power plants.
The 71-page report is available for download. - 2.4 MB pdf
GAO REPORT - September 2008
Key Barriers To CCS Deployment:
" . . . (I)t is likely that thousands or tens of thousands of injection wells would need to be developed and permitted in the United States." (page 40)
". . . DOE has worked . . . to evaluate the potential for CO2 geologic sequestration across the United States. However, knowledgeable authorities agree that a more detailed evaluation of these sites' actual capacity is needed. . . . (to) determine whether these potential sites are actually appropriate for long-term CO2 sequestration. For example, it is currently not known whether the caprock overlying these geologic formations is sufficient to contain stored CO2." (page 46).
DOE's Focus on IGCC Technology Questioned
" . . . National Academy of Sciences and international organizations have raised questions about how the (DOE's) focus on IGCC technology may have affected the broader effort to substantially reduce CO2 emissions from coal-based electricity generation because (1) the outlook for widespread deployment of IGCC technology is questionable and (2) the agency's funding related to IGCC technology has substantially exceeded funding for technologies more applicable to reducing emissions from existing coal-fired power plants." (page 31)
" . . . (N)umber of compelling factors, such as the relative cost of IGCC plant construction and the limited operational experience worldwide with this relatively new technology, which may limit commercial deployment of IGCC technology. Several industry stakeholders . . . expressed concerns about using IGCC technology for electricity generation, including the cost of constructing IGCC plants and possible reliability concerns. For example, officials from one electric power company . . . thought high levels of CO2 capture at IGCC plants would necessitate the use of a turbine, which has not yet been commercially demonstrated." (page 33)
Potential Public Opposition Arising from Health Concerns
In addition to possible changes in groundwater flow and/or contamination of drinking water by arsenic, lead and other compounds, the report notes:
". . . (I)mproperly operated injection activities or ineffective long-term storage could result in release of injected CO2 to the atmosphere, resulting in the potential to impact human health. . . . One concern is . . . at very high concentrations and with prolonged exposure, CO2 can lead to suffocation. Concerns have also been raised that . . . (it) could raise the pressure in a geologic formation, and . . . could trigger seismic events, such as earthquakes." (page 48)
Two ways to read Tim Montague's summary:
1) CAMP link: CCS page
2) Download: RACHEL'S DEMOCRACY & HEALTH NEWS - October 16, 2008 - 60 KB pdf
CAMP UPDATE: OFFICE OF THE LEGISLATIVE AUDITOR HAS RELEASED THEIR FINDINGS
September 25, 2008
ACTION NEEDED BY CAMPERS
Excelsior is due to pay more than $1 million in interest to the IRR in December 2008. Under the terms of the loan agreement, it was due in April 2007. Commissioner Layman has granted two extensions. No additional time should be granted.
The Mesaba Project is in trouble on all fronts: PPA denied; EIS delayed; no private investors.
TELL IRON RANGE LEGISLATORS WHAT YOU THINK ABOUT ANY MORE FINANCIAL OR LEGISLATIVE SUPPORT FOR THE MESABA ENERGY PROJECT
Use the following links:
Rep. Loren Solberg
Senator Tom Saxhaug
Senator David Tomassoni
Rep. David Dill
Rep. Tony Sertich
Rep. Tom Rukavina
Use this mail form on Senator Tom Bakk's website.
LEGISLATIVE AUDITOR: IRR DID NOT ADEQUATELY OVERSEE EXCELSIOR ENERGY'S USE OF LOAN PROCEEDS
As we reported in late May (see 5/28 entry), the Office of the Legislative Auditor (OLA) has been investigating the $9.5 million in unsecured loans provided by Iron Range Resources to Excelsior Energy for the Mesaba Project. This resulted from a request by CAMP that OLA investigate questionable items that CAMP had discovered. Here's the news release that CAMP has sent to the media.
OLA concludes that IRR:
As a result:
The excessive reimbursements of $40,161 include:
OLA noted that although in the fall of 2007 IRR requested Excelsior to conduct a comprehensive review of all submitted invoices to verify their eligibility for reimbursement, IRR did not follow up on this request. OLA is recommending that IRR:
The report is available at: Office of the Legislator Auditor
If IRR follows OLA's recommendations about 1) identifying what types of lobbying activities are ineligible for reimbursement and 2) reviewing law firm invoices reimbursed to Excelsior, it might recover large sums. Excelsior has reported $1.12 million in Minnesota lobbying disbursements through 2007. It received IRR reimbursement for hundreds of thousands of dollars for invoices from multiple law firms. It is likely that a close examination of those invoices would reveal that a significant amount was for "public affairs" activities that should be included in any reasonable definition of lobbying. Unfortunately, the copies of the invoices that IRR provided to CAMP were redacted so that the nature of the services was concealed. In the instance cited by OLA where the reimbursement records were discarded, IRR could request Excelsior and the law firm in question to provide copies of the law firm's invoices from that time.
In addition to the inadequate oversight found by OLA, documents obtained by CAMP from IRR reveal that it has repeatedly excused Excelsior from performing as required by the loan agreements. The initial requirement for $4.9 million in matching private money was waived in 2004. In 2007 IRR Commissioner Layman granted two extensions for Excelsior's first interest payment, which is now due at the end of 2008 unless Excelsior obtains either a $100 million equity investment from a third party or a power purchase agreement (PPA).
Despite its efforts since 2001, Excelsior apparently has failed to obtain any private investment beyond the initial $60,000 stock purchase by its two shareholders, Tom Micheletti and Julie Jorgensen. After a long and costly proceeding, the Minnesota Public Utilities Commission (MPUC) denied Excelsior's petition to order Xcel Energy to purchase Mesaba's power, finding it not in the public interest because it is too expensive and risky. Without a PPA the project is financially untenable. Mesaba's final environmental impact statement, essential to obtaining siting, routing, air and water permits, has been significantly delayed, partly due to a faulty site selection process. Without these permits the project cannot be built.
"The only one benefiting from the IRR loans was Excelsior Energy, which leveraged them into another $36 million of taxpayers' money from the Department of Energy and $10 million from the state's Renewable Development Fund", said Dr. Ed Anderson, CAMP Co-Chair. "Excelsior has wasted tens of millions on lobbyists, lawyers, consultants, executive salaries, and expert witnesses for the PPA case it lost at the MPUC and the permitting case that is foundering. Excelsior's principals should not be given more time to pay themselves hundreds of thousands from public dollars for this failed project. IRR should not grant any further extensions for payments owed by Excelsior Energy."
CAMP UPDATE: MESABA'S FINAL ENVIRONMENTAL IMPACT STATEMENT DELAYED AGAIN!
August 20, 2008
After the public hearings on the Draft EIS early in 2008, the Mesaba FEIS was scheduled to be released in March 2008. It has been repeatedly postponed - DOE's July schedule had it for September. NEWLY POSTED SCHEDULE SAYS FEBRUARY 2009!
DOE says: "It has taken longer than we had anticipated to prepare responses to comments received on the Draft EIS."
We'll let CAMPers know as more information becomes available regarding the FEIS.
CAMP UPDATE: MESABA STRIKES OUT AT PUC
August 15, 2008
At a hearing on August 14th the Public Utilitiy Commissioners unanimously:
Speaking on behalf of the the Department of Commerce's Office of Energy Security, Dr. Eilon Amit told the Commissioners he hadn't prepared any remarks because he thought they'd already heard enough.
PHASE 2 - DONE
This was Excelsior's effort to force Xcel to purchase the output of Unit 2 in addition to Unit 1. By determining that it is not likely to be a least cost resource for Xcel, the PUC put an end to this part of the PPA.
PHASE 1 - DEADLINE 5/1/09
The output of Unit 1 (603 MWs) was determined in August 2007 not likely to be a least cost resource. However, the PUC ordered Xcel to continue negotiating with Excelsior to try to achieve a mutually acceptable PPA.
The PUC acknowledged no progress in the negotiations and set a deadline of May 1, 2009. This is to allow the parties a few months to negotiate using new information that is expected by the end of the year: a report from the Office of Energy Security assessing Minnesota's foreseeable need for additional generation; and final approval of Xcel''s pending Integrated Resource Plan.
Chairperson Boyd stated that if there is no PPA or joint request to extend the deadline, Xcel will have no obligation to continue bargaining after 5/1/09.
After that, the parties may choose to appeal the PUC's decisions in court.
Not Necessarily Over
It is still possible under the 2003 legislation for Excelsior to propose a new PPA with different terms that resolve the issues identified in the current PPA. Xcel would be obliged to negotiate and the PUC could be petitioned to force it. This is not likely to succeed unless Excelsior can find a way to significantly lower the costs of Mesaba's power and to capture and sequester its CO2 emissions.
CAMP UPDATE: MESABA HEARINGS AUGUST 14TH AT PUC
August 9, 2008
Excelsior Energy's contrived delays of a PUC final decision on the Power Purchase Agreement may have come to an end.
Excelsior's most recent attempt consists of three motions filed on July 3rd. The PUC's Staff Briefing Paper, (36 KB pdf), recommends denying all of the motions. If the PUC votes accordingly, it can then proceed to the basic question regarding the PPA.
PPA - Phase 2
We've been waiting for the PUC to address this issue since the Administrative Law Judge issued his report and recommendations on 9/14/07. The ALJ recommended against approval. It is almost certain that the PUC will follow the ALJ's recommendation. For more information, see CAMP's 4/27/08 Update and the Staff Briefing Paper.
PPA - Phase 1
Although the PUC ruled in August 2007 that the PPA was not in the public interest, it also ordered Xcel Energy to keep negotiating with Excelsior. Those negotiations have not been fruitful and the PUC likely will set a deadline to end its mandate for continuing negotiations. We hope that deadline will be soon. At that point the PUC can finalize its order denying the PPA and the parties can proceed to appeal to the courts if they choose to. For more information, see CAMP's 4/27/08 Update and the Staff Briefing Paper - 204 KB pdf.
Chair Koppendrayer retired at the end of June and Betsy Wergin has been appointed to the remaining 1 1/2 years of his term. Wergin has resigned her seat as a state senator (Republican) to take the PUC position. She has no discernible relevant background; she is Koppendrayer's sister.
The Governor designated David Boyd, whom he appointed to the PUC in 2007, as chairperson.
Investigation by the Office of the Legislative Auditor - Report Due
OLA's report on its "preliminary assessment" of CAMP's complaint about the management and use of the $9.5 million in IRR funding for Mesaba is scheduled for release in the latter half of August. Prior to that time the report will be made available to IRR management and its comments will be included in the release. For more information see CAMP's 5/28/08 Update.
Siting Docket and Final Environmental Impact Statement
The Department of Energy has repeatedly delayed the release of the FEIS since March. It is now scheduled for September. If and when that occurs, the public will have ten business days to submit comments to the ALJ. We will alert CAMPers at the proper time.
CAMP UPDATE: AUDITOR EXAMINES IRR LOANS TO EXCELSIOR ENERGY
May 28, 2008
The Office of the Legislative Auditor (OLA) has been examining Iron Range Resources (IRR) records regarding its $9.5 million in unsecured loans to Excelsior Energy for the Mesaba Project. Brad White, Audit Manager, has now confirmed that OLA is conducting an assessment of a complaint, to determine whether a formal audit should be conducted. This is the result of a request by CAMP that OLA investigate questionable items that CAMP had discovered.
Digging Through Files
Last fall a team of CAMPers went to the IRR office, dug through piles of loan-related documents, and photocopied many of them. After studying the information retrieved, we concluded that there were serious questions about IRR's management of the loans and Excelsior's use of the funds.
Referral to OLA
We explained our concerns and submitted back-up documentation to the Office of the Legislative Auditor, which has authority to investigate alleged misuse of state money or resources. The Audit Manager replied that the Office planned to "examine Iron Range Resources actions and management of the Excelsior Energy loan. That audit will take place this spring/summer . . . ". Although we are disappointed to learn that OLA is not yet conducting a formal audit, we expect that it will decide to do so after the initial assessment.
Areas of Concern
It did not seem appropriate to make this information public until recently when rumors of OLA's activities at IRR leaked out. CAMP is issuing a News Release so that CAMPers and the general public can know the nature of our concerns and some of the questions raised.
CAMPers are encouraged to download the News Release by clicking here and send it to anybody who would or should be interested.
CAMP UPDATE: SPIN, SMOKE & MIRRORS FOOL THE MEDIA BUT NOT CAMPers
May 9, 2008
Investment Tax Credits
Excelsior Energy has issued a news release, crowing about $133.5 million in federal investment tax credits for the Mesaba Project. Newspapers across the Range have relied on this release to spread Excelsior's portrayal of the Project as alive and well. However, they all missed the significance of the statement that the IRS has "allocated" this amount. The IRS notice of "allocation" is a preliminary step and significant hurdles remain before the tax credits are finalized.
Basic research into this incentive program reveals significant points not included in the news reports:
In the same news release Excelsior again gave the false impression that it has also received federal loan guarantees. Similar misleading statements were repeated by Tom Micheletti to the Hibbing and Virginia newspapers.
The Project has not received or yet qualified for any federal loan guarantees. The most recent public information was DOE's announcement in October 2007 that the Project was one of sixteen pre-applicants selected to submit full applications. These competing projects will be ranked by specified criteria. Twenty-nine detailed requirements are listed for submitting a full application, several of which are likely to present obstacles for the Mesaba Project, particularly the lack of a PPA and insufficient private equity. Greater weight will be given to applications that rely upon a smaller guarantee percentage; this conflicts with Excelsior's stated expectation of receiving the maximum of 80%.
PUC To Decide Whether Ratepayers Protected
Micheletti also reportedly stated that this means that the government and investors will bear all financial risks associated with the the Project and so "Minnesota consumers are protected".
If Micheletti's claim is true, all he needs to do is revise his proposed PPA with Xcel Energy and get the PUC to reconsider its prior decision that Mesaba's financial and operational risks are too great to be imposed on Xcel's ratepayers.
CAMPers should not hold their breath until this happens.
CAMP UPDATE: MESABA HEARING FOR MAY 8th POSTPONED
May 6, 2008
On May 6th Excelsior Energy requested that the PUC postpone the hearing scheduled for May 8th on Phase 2 of the Power Purchase Agreement that Excelsior is trying to force on Xcel Energy.
Excelsior's stated reason is that it has not had the 20 days that the rules allow for filing a Petition for Reconsideration of the PUC's 4/23/08 order. That order denied Excelsior's request for an indefinite delay of the Phase 2 hearing.
Excelsior says that it "is currently drafting its Petition for filing no later than May 14, 2008, and will endeavor to file its Petition early". CAMPers know that Excelsior's attorneys could have filed such a petition quickly if they wanted to, and they have known that their request was denied since the hearing on April 10th.
Excelsior is succeeding in delaying a final PUC decision on the PPA by making repeated requests for stays and continuances, which take time to process even if they are ultimately denied. Excelsior apparently agrees with CAMPers that the final PUC decision will mark the end of the Mesaba Project.
PUC staff say that this matter will be rescheduled "at an as now unknown date in the future after reconsideration requests are dealt with."
We'll let CAMPers know when it is rescheduled.
CAMP Update - PUC SCHEDULES HEARING ON PHASE 2 OF MESABA PPA
April 27, 2008
THURSDAY, MAY 8, 2008 (#6 and last on the agenda) This could lead to the final blow for the Mesaba Energy Project. CAMPers have been eagerly anticipating this date since the Administrative Law Judge's report was issued last September.
Want to be there? We will try to find out what time this docket is likely to be reached on May 8th and let you know.
Anyone interested in carpooling to attend the hearing should respond to CAMP.
The PUC will consider two questions:
Past Decisions Predict Outcome
The PUC decided in Phase 1 of the PPA that the Project was not likely to be a least-cost resource, and that was the conclusion of the ALJ in Phase 2. We expect that the PUC will again reach the same conclusion, and again rule that Excelsior Energy's proposed power purchase agreement (PPA) should not be imposed on Xcel Energy.
Fruitless Negotiations Should End
In August 2007 the PUC rejected Phase 1 of the requested PPA but ordered negotiations to continue between Excelsior and Xcel. The PUC subsequently ordered 60-day reports on the status of the negotiations, which show that they have not been successful. The PUC has noted that similarly, Excelsior has been unable to report success in negotiations with other utilities for the purchase of its output. The PUC will likely set a deadline on the negotiations, and when that arrives, finally deny the PPA.
This will leave Excelsior without the long-term customer that it needs in order to finance and build the Project. Absent some heroic life-saving infusions of money by the state or federal government, that should toll the death knell for the Mesaba Project.
CAMPers WILL BE INVITED TO THE WAKE!
CAMP Update on PUC Hearing Held April 10, 2008
April 12, 2008
PUC UNANIMOUSLY DENIES DELAY REQUESTED BY EXCELSIOR ON PPA
On April 10th, the PUC, without discussion, voted 5 to 0 to deny Excelsior Energy's request for an indefinite stay of the proceeding regarding Phase 2 of the Power Purchase Agreement Docket.
This means that the PUC "Staff will bring the complete Phase 2 issue back to the Commission in a timely manner". The problem is what is considered timely, considering that the ALJ's report on Phase 2 was issued in mid-September. Excelsior already achieved a significant delay by filing the request for a stay in mid-February, resulting in this procedural hearing on April 10th.
The PUC's regular meetings are on Thursdays. So far the agendas have not been posted for dates subsequent to April 17th. CAMP will be watching the PUC calendar and will alert CAMPers when this matter is scheduled. That hearing is likely to result in a final denial of the PPA, leaving the Mesaba Energy Project unable to attract the investors needed to move the Project forward.
PUC GRANTS EXCELSIOR'S PETITION REGARDING TRANSMISSION
(but it doesn't solve the Project's fundamental problems)
On a vote of 3 (Reha, O'Brien & Pugh) to 2 (Koppendrayer and Boyd), the PUC found that "all transmission infrastructure associated with the Mesaba Project" is exempt from the requirements of a certificate of need (CoN), regardless of which entity builds and owns it. Minnesota Power, which may have to build and/or own it, is concerned that this may become a legal issue in the future if it is challenged by affected landowners after the route is determined.
Discussion indicated that some Commissioners were influenced to grant Excelsior's seemingly premature request by deadlines in the Interconnection Agreement among Excelsior, Minnesota Power and the Midwest Independent System Operator (MISO).
Commissioner Reha suggested that Excelsior was putting the cart before the horse, given that the Project may never be built because of serious issues with the PPA and costs. However, she agreed that Excelsior's position was supported by the statutory language that exempts an Innovative Energy Project (IEP) from a CoN.
Although the PUC previously determined that Mesaba qualifies as an IEP, Minnesota Power has indicated that it may challenge that in court. So this is likely not the final word on this issue.
Chair Koppendrayer Voices Lack of Support for Project
During this discussion, Chair Koppendrayer said (according to hurried notes):
UPDATE ON PUC HEARING - APRIL 10, 2008
The PUC has scheduled hearings on two of the Mesaba Energy Dockets.
Docket No. 05-1993 - Power Purchase Agreement - Phase 2
In September 2007 Administrative Law Judge Bruce H. Johnson issued a report and recommendations regarding Phase 2 of the PPA proceeding. The issue was whether Xcel Energy should be required to purchase at least 13% of the energy it provides to its retail customers from Mesaba. (In Phase 1 the PUC decided not to require Xcel to purchase 2%). The ALJ's conclusion in Phase 2 was the same as in Phase 1: the Mesaba Project is not likely to be a least-cost resource and so Xcel should not be forced to purchase its output.
CAMP has been watching for months for the hearing on Phase 2 to be scheduled, expecting that the PUC would finally deny Excelsior's attempt to force a PPA on Xcel Energy. Apparently Excelsior feared that would be the result and so on 2/14/08 Excelsior requested that a decision on Phase 2 be postponed indefinitely. Minnesota Power and Xcel both filed objections and the issue to be addressed on 4/10/08 is: Whether the PUC should grant the request for an indefinite stay of Phase 2.
Docket No. 07-1640 - Certificate of Need for Transmission Infrastructure
The other issue to be considered on 4/10/08 is: Whether the PUC should dismiss or grant Excelsior's petition regarding transmission infrastructure. (It is remarkable that the option of conducting a contested case proceeding is not being considered.)
Excelsior has requested a finding that all transmission infrastructure associated with the Mesaba Project is exempt from the requirements of a certificate of need, regardless of whether the Mesaba Project or some other entity actually permits, owns, constructs, or oversees the construction of this infrastructure. Minnesota Power has objected to this, arguing that no decision should be made until both phases of the PPA are complete and the parties have time to appeal the PUC's final decision. Xcel agreed with this position and also pointed out that the Siting and Routing Docket and necessary permits should be finalized before the transmission issues are addressed.
The parties' filings and the notice of hearing can be found by going to - www.edockets.state.mn.us/EFiling/DocumentSearch.do - and entering the docket number.
Carpooling to St. Paul
Any CAMPers who are interested in sharing vehicles and costs to attend the hearing should reply to CAMP - firstname.lastname@example.org
Please state the number of travellers in your party and whether you have a vehicle that could be used and how many people it can comfortably accommodate.
There are other items on the PUC's calendar for the same day and we are trying to estimate the likely start time for the Excelsior issues. We'll let you know when we have more information.
UPDATE ON SITING AND ROUTES DOCKETThis proceeding leads up to the PUC's decision on permits for Mesaba's plant site and routes for its natural gas pipeline and HVTLs. These decisions are supposed to be based on Excelsior's Joint Permit Application and Environmental Supplement, filed in June 2006. Excelsior also filed written testimony from more than twenty "expert witnesses" (well-paid consultants) in January 2007. The last-minute surprise was a supplemental filing on January 28, 2008, abandoning the plan to discharge Mesaba's cooling tower blowdown water, and announcing an enhanced Zero Liquid Discharge system. (see article below for Ed Anderson's 1/25/08 response to Excelsior's self-congratulatory press release).
The PUC is also supposed to consider the Environmental Impact Statement and the opinions of the DNR, MPCA, and Health Department regarding whether the Project will qualify for necessary air, water, and waste permits. Although these agencies have filed extensive comments in response to the Draft EIS, they were not represented at the hearings. We hope that their comments will be taken into consideration in the Final EIS. The PUC will have to determine that the FEIS is adequate before it decides on the permits.
Administrative Law Judge Steve Mihalchick conducted public hearings in Taconite on January 29th, and in Hoyt Lakes on January 30th to allow Excelsior Energy to present its 20 expert witnesses and formally offer their prefiled written testimony from a year earlier. Technically, Excelsior is the only party in this proceeding but the ALJ chose to treat the Department of Commerce and its attorney, Karen Hammell, like a party. This meant that she was given the "right" to question the witnesses, which she chose to do only sparingly. The ALJ also had the "right" to question the witnesses, which he also did sparingly.
Under the rules the public has a right to question the witnesses but the ALJ has discretion over timing and duration of this questioning. On the first day, in Taconite, well-informed questions hit their marks. They were asked by: Ross Hammond (Fresh Energy), Carol Overland and Alan Muller (Mncoalgasplant.com/MCGP), Ron Rich (Swan Lake Association), and Andy David. They challenged: the estimated economic impact for the region; dangers from escaping carbon monoxide; validity of emission estimates; handling of heavy metals in the slag; disposal of captured mercury; disposal of hazardous solid waste from the ZLD system; best available control technologies (BACT); and problems that occurred at the Wabash, Indiana plant, which is the model for Mesaba. Excelsior got through only two of its witnesses in the morning session and two more in the afternoon session.
In addition to a good turnout of CAMPers, the evening session was crowded with local elected officials and union members, speaking of the need for jobs and economic development. CAMPers, raised more substantive concerns and important questions but the ALJ was busy doing his paperwork and not paying attention. At 8:30 p.m. he said how much he enjoys and appreciates having people pour their hearts out and adjourned the meeting.
On the second day of hearing, in Hoyt Lakes, the rules were changed to prohibit the public from asking questions until Excelsior had finished presenting the testimony of all of its witnesses. This meant that no questioning was permitted until after the dinner break and after the public comments were heard. The effect was that only Carol Overland and Alan Muller got the opportunity to question the witnesses and then for only about one and one-half hours before the ALJ shut it down. CAMP and MCGP are filing a protest over the failure to allow sufficient time for public questioning and input, and requesting additional time.
The ALJ has revised the schedule for this docket, allowing Excelsior to file supplemental materials until February 6th (we're still looking for them), and allowing the public until February 29th to file comments. CAMPers will be hearing more about this soon. One problem with the schedule is that it allows only one week between the anticipated publication date of the FEIS and comments on its adequacy. CAMP is going to try to rectify this situation.
PUBLIC INTEREST OR EXCELSIOR'S INTERESTS?
February 3, 2008
CAMP Co-chair Charlotte Neigh
Imagine your investment club decided to lend a lot of money to a business venture under certain terms and conditions. Later you found out that the borrower missed the contractual deadline for the first interest payment but the club's treasurer gave an extension of time for the payment and also gave the borrower more of the club's money. When the new deadline arrived, although the borrower failed to meet the specified milestones, the treasurer gave the borrower another year to make the first payment, based on the borrower's rosy promises. Would you feel that your money and that of your coinvestors was being managed properly?
This is what happened with $9.5 million of IRR funds that were loaned to Excelsior Energy for the Mesaba Project. In the spring of 2007 Tom Micheletti asked for an extension beyond April 23rd to make the first interest payment of about $1 million. The deadline passed without an extension being granted and IRR could have declared Excelsior to be in default under the loan agreement. This was the status on May 31, 2007, when Excelsior asked IRR to give it another $2.75 million - the balance of the $9.5 million, which IRR did.
Then on July 23rd IRR Commissioner Sandy Layman, without a vote of the IRR Board, granted an extension to December 31, 2007, for the interest payment; and on that date she granted another extension to December 31, 2008, again without a vote of the Board. The Commissioner's letter noted that Excelsior had failed to meet the required milestones, but she granted the additional extension anyway. Where does she get the authority to make such decisions about risking the public's money without the oversight of the Board? Have the Board members decided that ceding their authority to the Commissioner is preferable to a public meeting where their votes might be questioned?
IRR knows that the Mesaba Project has not been able to achieve the power purchase agreement that it needs with Xcel Energy. The Minnesota Public Utilities Commission denied Excelsior's attempt to force the PPA, declaring it to be not in the public interest. Tom Micheletti minimized this as a "delay", and Commissioner Layman chose to act as if she believes this, even though a cursory investigation would show that the PUC likely will soon finalize its decision disapproving the PPA.
The legislative session starts on February 12th, and Excelsior will be seeking additional assistance for its troubled Project, after already having spent more than $700,000 on lobbying. We need to be vigilant because Excelsior will be courting our District 3 legislators, as well as other members of the Iron Range delegation, for more special favors. Tell your Senator and Representative that no more benefits for Excelsior should be on the legislative agenda.
Excelsior Energy: Environmental Consciousness or Desperation?
January 25, 2008
CAMP Co-chair Ed Anderson
Excelsior Energy has announced a "major water quality improvement program" whereby they pledge to eliminate discharge of cooling water by a process called Zero Liquid Discharge (ZLD). The announcement also describes upgrading the Coleraine/Bovey/Taconite wastewater treatment facility (WWTF) in order to improve water quality in Trout Lake and the Mississippi River watershed. The press release is an interesting development, but not entirely unexpected. Excelsior is unable to obtain water discharge permits with their current proposal. Completely eliminating water discharge is the only way they can proceed. If Excelsior Energy really had intentions of being environmental stewards and wanted to "mitigate environmental impacts", measures such as ZLD and carbon dioxide capture and sequestration would have been in the plan from the beginning.
Senator Saxhaug was quoted in Excelsior's press release as saying "Excelsior didn't have to do this to get licenses, but they have agreed to do all they could to demonstrate they intend to be good environmental stewards. This is a very promising development." Obviously Senator Saxhaug has been influenced by Excelsior's spin, and apparently he hasn't been following this issue closely. Excelsior has fought hard to avoid eliminating water discharge and has repeatedly shown us that the focus is on dollars, not environmental stewardship. ZLD is extremely expensive to implement, and will mean a loss of efficiency with regard to power output. A major reason Excelsior changed their preferred site to the West Range was because the East Range site required ZLD due to the more stringent mercury criteria of the Lake Superior watershed.
Excelsior's Joint Permit Application clearly shows that under the original plan, the Mesaba Energy plant would cause the Canisteo Mine Pit to exceed water quality standards for hardness and dissolved solids. Mercury levels in the pit would rise sharply, the lake trout fishery would be ruined, and the polluted Canisteo water would put local municipal drinking aquifers at risk of contamination. Water was also proposed to be discharged into the already impaired Swan River system. CAMP has advocated for elimination of water discharge all along, so we see this announcement is a positive development.
The problems with this announcement are that:
This announcement is important in that Excelsior appears to be finally dealing with the reality of discharge water permitting, and if the plant is ever funded and built, there would be less environmental impact. Excelsior's newest water discharge plan is not about environmental stewardship; it's a necessity. Excelsior is desperately fighting to stay alive, and now we're seeing major concessions so that the project might remain viable.
MPUC SUPPORT FOR MESABA FADES
November 1, 2007
At its meeting on 11/1/07 the Minnesota Public Utilities Commission considered requests from the parties regarding its 8/30/07 Order denying Excelsior Energy's effort to force a power purchase agreement on Xcel Energy.
Excelsior, Xcel and Minnesota Power had all filed petitions for reconsideration and/or clarification (see CAMP's 9/27/07 Update). The only request granted by the MPUC was to issue an erratum notice to correct legal citations in the initial order.
The Commission added an Issue not presented by the parties:
"Should the Commission Reconsider its August 30, 2007 Order On Its Own Motion with Respect to the Party Negotiations of a Final Power Purchase Agreement?"
The Commission came close to terminating the negotiations and putting an end to Excelsior's quest for a forced PPA with Xcel. In the course of the discussion the Commissioners indicated that no utilities need or want Mesaba's energy because it uses coal and is too expensive. They noted that plans for coal-gasification plants have recently been delayed or canceled in three other states.
Chair Koppendrayer said "This dog won't hunt" and told Excelsior it needs a new plan. Commissioner Reha said it's apparent that the PPA "isn't going to fly" at the present time.
The PPA proceeding was divided into two phases. In August the MPUC ruled on Phase 1 - that it was not in the public interest because it shifted too much of the cost and risk to Xcel ratepayers. An Administrative Law Judge has issued a report finding the same problems with Phase 2, which will be considered by the MPUC in the near future.
At that time the Commission will consider whether or not to put a time deadline on negotiations or TERMINATE THE NEGOTIATIONS, which now appears likely to be the outcome. That would let Xcel off the hook and leave Excelsior with little prospect of finding a customer for Mesaba's output. That should put an end to the Mesaba Project.
CAMP'S Response to Rolf Westgard & Duluth News Tribune
October 17, 2007
Recently an opinion piece by Rolf Westgard was published in the Duluth News Tribune, advocating for Excelsior Energy's Mesaba Project - a power plant proposed to be built near the Scenic Highway in Itasca County.
Mr. Westgard's premise that it is possible to use coal "cleanly" echoes the Bush administration's "clean coal initiative", an oxymoron and myth designed to obscure coal's problems and enhance the financial interests of the coal industry. People are tempted by the promise of "clean coal" because it is abundant in the U.S. and has a relatively low direct cost. Federal policy and incentives enable promoters of IGCC technology to mislead the public about claimed benefits.
Under these circumstances, Mr. Westgard may be correct in saying that coal's share of electric energy generation in the U.S. is projected to increase to 57% by 2030. That does not mean that it's a good thing or that thoughtful citizens shouldn't work to avoid it. Even though some reduction in SO2 emissions is achieved by IGCC technology, it is still dirty and contributes to all of the health and environmental problems known to be caused by coal mining, transport and combustion.
In the contested case proceeding the administrative law judges (ALJs), relying on an analysis by the Minnesota Pollution Control Agency (MPCA), compared IGCC technology to supercritical (SCPC) and ultrasupercritical (USC) pulverized coal plants. They found that although the Project is expected to significantly outperform future SO2 emission reductions of the other technologies, it is expected to only slightly outperform them in reducing particulate matter emissions, and to slightly underperform them in reducing NOx emissions. The ALJs also found that IGCC technology is not inherently better at controlling mercury emissions.
A plant with higher heat efficiency produces fewer emissions for each unit of electricity produced. Mr. Westgard claims that the Mesaba Project would be one of the world's most efficient coal plants. The MPCA and the ALJs concluded that, operating on subbituminous coal, Mesaba's thermal efficiency would be 36.3%. This is lower than the EPA would expect from a "generic" IGCC plant (40%), SCPC plants (37.9%), and USC plants (41.9%).
Capture and Sequestration of Carbon Dioxide
Mr. Westgard ignores the problems of capturing and sequestering CO2. Excelsior has no intention of capturing CO2 until it is required to do so. It admits that currently available technology would enable it to capture only 30% of Mesaba's five million annual tons. This would also increase the cost for electricity that already costs 30% more than electricity available from other sources, including renewables. This is one of the reasons why the MPUC found Mesaba's proposed power purchase agreement not to be in the public interest.
The Mesaba Project is planned for a site that is about as far as it could be from potential sequestration sites. Piping the CO2 to western North Dakota or Canada would cost hundreds of millions of dollars, and it would reduce the efficiency of the plant by 10%. The feasibility of large-scale and/or long-term sequestration has not yet been proven. There are known environmental and health dangers from migrating and escaping CO2. A new coal-powered plant built today can be expected to operate for fifty years. We must not allow such proliferation of greenhouse gases.
Excelsior Energy has already received about $40 million in public subsidies to promote and develop the Mesaba Project. It is counting on between $800 million and $1.6 billion in federal loan guarantees and $130 million in federal tax credits. Such sums of money could better be spent on research and development of alternative and renewable sources of energy and improved distribution systems to replace dirty coal as the mainstay of our electric energy generation.
CAMP Update: IGCC Woes
October 14, 2007
While CAMP supporters are watching and waiting for Excelsior Energy's next moves on the Mesaba Energy Project, there is more bad news regarding IGCC project financing.
Excelsior already has an uphill climb to revise its proposed power purchase agreement to satisfy the Minnesota Public Utilities Commission. Now an industry report says that IGCC costs have escalated between 30% and 50% since the beginning of 2006, and as much as 100% since 2004.
An energy industry research and analysis group (Emerging Energy Research) issued a report on October 5, 2007, saying that much of the momentum behind IGCC has waned because of rising capital costs, stabilizing natural gas prices, and an uncertain outlook for carbon policy.
On 9/18/07 a major Dutch utility (Nuon - "perhaps the world's biggest utility proponent of IGCC") after two years of deliberation and project evaluation, tabled its proposed 1,200 MW IGCC project in the Netherlands.
On 10/4/07 TECO (regional Florida utility Tampa Electric) announced that it is shelving its plans for a 630 MW IGCC project, even though in 2006 it was awarded over $130 million in federal tax credits to build the project.
"These cancellations are a very clear indication of the widespread challenges facing IGCC over the next two to five years."
More detail is available in the three-page pdf version:
Federal Loan Guarantees and Mesaba Energy Project
October 8, 2007
Excelsior Energy used an announcement by the U.S. Department of Energy regarding its Loan Guarantee Program to get positive media coverage for its Mesaba Project. The two media sources checked on Saturday (Channel 13 in Duluth and MPR) both noted the problems with the power purchase agreement. However, the MPR report on Sunday let Julie Jorgensen's questionable claims go unchallenged and the Grand Rapids Herald Review published Excelsior's News Release unfiltered.
Excelsior's News Release is conveniently oversimplified. It says: "the Mesaba Energy Project has been selected from 143 applicants to begin the final review process for its loan guarantee program". The DOE's News Release says that 16 project sponsors, who submitted pre-applications in the fall of 2006, have been "invited . . . to submit full applications for loan guarantees", which "will undergo disciplined and rigorous reviews". Mesaba and others have until October 30, 2007 to notify DOE that they plan to submit a full application.
Given the federal government's infatuation with the myth of "clean coal" and the IGCC technology, it is not surprising that Mesaba is among the projects selected to submit final applications. However, even the DOE's description of Mesaba states only that it "would allot space in its design for CO2 capture and storage". This should ultimately be found inadequate to meet the standards set forth in the regulations.
Excelsior's News Release also quoted Jorgensen as claiming that "the loan guarantee offers Minnesota consumers unparalleled protection from the risks of . . . innovative technologies". This ignores the determination by the Minnesota Public Utilities Commission that Excelsior's proposed power purchase agreement was too risky financially and operationally, even though the PPA already factored in the benefit of federal loan guarantee.
The Mesaba Project is a long way from achieving a federal loan guarantee. The rigors of the application and screening process will be a significant challenge. There are also monetary hurdles: in submitted comments, TXU said that the costs of securing a guarantee could be hundreds of millions of dollars; applicants must pay fees to cover DOE's administrative costs of processing the application; and before a Loan Guarantee Agreement can be finalized, applicants must pay a substantial Credit Subsidy Cost.
The DOE's News Release and a link to the regulations can be found at:
The loan guarantee program was authorized by Title XVII of the Energy Policy Act of 2005, for up to 80% of the cost of projects that employ new or significantly improved technologies as compared to commercial technologies that are in service in the United States when guarantees are issued. The fact that Mesaba might be eligible for such a guarantee was noted in DOE's publications in the fall of 2005. The loan program could not begin to operate until the DOE established regulations to govern it, which have just been finalized. The total amount made available for the loan guarantees in 2007 was $4 billion. Congress is currently considering DOE's request for $9 billion for fiscal 2008. There likely will not be enough money to fund all of the projects that have been invited to submit full applications. The DOE will score and rank the applications by criteria set out in the new regulations, which are found in Part 609 of of Title 10 of the Code of Federal Regulations.
Section 609.6 lists twenty-nine detailed requirements for submitting an application, including:
(12) An analysis of the market for any product to be produced by the project, including relevant economics justifying the analysis, and copies of any contractual agreements for the sale of these products or assurance of the revenues to be generated from sale of these products.
Problem: No Power Purchase Agreement.
(21) A preliminary credit assessment for the project without a loan guarantee from a nationally recognized rating agency for projects where the estimated total Project Costs exceed $25 million. . .
Problem: Standard and Poors has determined that IGCC projects should be assigned a risk premium unless at least five such projects are in operation with a satisfactory record.
(22) A list showing the status of and estimated completion date of Applicant's required project-related applications or approvals for Federal, state, and local permits and authorizations to site, construct, and operate the project;
Problem: The release of the draft EIS has been delayed repeatedly and, if released, likely will point out serious impediments to the required permits.
Section 609.7 lists the factors that will be weighed in deciding which applications should receive loan guarantees. It states that greater weight will be given to applications that rely upon a smaller guarantee percentage, all else being equal.
Problem: Excelsior has always assumed, and Jorgensen is still talking about, the maximum permissible 80%.
Among the sixteen criteria to be evaluated by the DOE:
(1) To what measurable extent the project avoids, reduces, or sequesters air pollutants or antrhopogenic emissions of greenhouse gases;
Problem: The Minnesota Pollution Control Agency has concluded that Mesaba will not significantly reduce air pollutants compared to other state-of-the-art coal technologies. Mesaba has no current intention of capturing and sequestering CO2 and admits that currently available technology would enable capture of only 30% of its CO2. This would have a prohibitive cost and reduce efficiency. Sequestration would likely increase the cost significantly and has not yet been proven feasible on a large scale or over a long time.
(7) The amount of equity commitment to the project by the Applicant and other principals involved in the project;
(9) Whether and to what extent the Applicant will rely upon other governmental assistance to support the financing . . . of the project . . . ;
Problem: Equity is defined as cash contributed by the Borrowers and other principals, not including proceeds from loans or the value of government assistance or support. The amount invested and risked by Excelsior's principals has always been questionable and kept secret. Its known financing to date is about $40 million in public funds.
(10) The feasibility of the project and likelihood that the project will produce sufficient revenues to service the project's debt obligations over the life of the loan guarantee and assure timely repayment of Guaranteed Obligations;
Problem: No Power Purchase Agreement.
(12) The Applicant's capacity and expertise to successfully operate the project, based on factors such as financial soundness, management organization, and the nature and extent of corporate and personal experience;
Problem: Excelsior Energy has no corporate experience; Mesaba I is its first project. Nearly all of its executives were employed at NRG, which declared bankruptcy in 2003.
(14) The levels of market, regulatory, legal, financial, technological, and other risks associated with the project and their appropriateness for a loan guarantee provided by DOE;
Problem: The MPUC determined that the financial and operational risks were reasons not to approve Mesaba's proposed PPA.
CAMP UPDATE: Nobody Likes PPA Order
September 27, 2007
CAMPers weren't the only ones who had problems with the PUC's 8/30/07 order regarding Excelsior Energy's petition to require Xcel Energy to purchase Mesaba's output under a long-term power purchase agreement (PPA). The parties had until September 19th to file a petition for rehearing. This is a mandatory step before a party may appeal a PUC decision to the courts. Petitions were filed by Minnesota Power, Xcel Energy, and Excelsior Energy.
The documents are summarized below. They can be found at:
Enter Docket No. 05-1993
MP has requested a rehearing and reconsideration of the determination that the Mesaba Project is an Innovative Energy Project (IEP). This was the PUC's crucial finding (reversing the ALJs) that entitles Mesaba to "substantial and extraordinary" incentives in the 2003 statute, such as exemption from certificate of need, eminent domain powers, $10 million from the Renewable Development Fund, and more.
MP reasserts that Mesaba does not meet the standards required in the legislation because it:
• Does not deliver significant emission reductions compared to traditional technologies; and
• Is not capable of offering a long-term supply contract at a hedged, predictable cost.
MP also argues that the PUC should not have relied on its 2/23/05 order approving $10 million in RDF funding for Mesaba, but should have reviewed the statutory definition of an IEP and the evidence that shows Mesaba does not qualify.
The issue of whether Mesaba qualifies as an IEP is fundamental and of great interest to CAMPers. If MP pursues this issue to the court of appeals, it will be trying to show that this finding by the PUC is not supported by substantial evidence in view of the entire record as submitted. MP's case should be helped by the fact that the ALJs made extensive findings contrary to the PUC's opinion.
Xcel filed a Request for Clarification or Modification, seeking more guidance from the PUC regarding its requirement that Xcel and Excelsior continue negotiating a PPA. Xcel offers a non-exclusive list of issues "that may prove to be significant challenges":
• Relationship of timing of the PPA to Xcel's need;
• Carbon capture and sequestration;
• Impact on Xcel's financial health;
• Pricing certainty and operational risks; and
• Whether other utilities should participate in the negotiations.
Could Xcel's "respectful request" be a diplomatic way of warning the PUC that this is not doable?
Not surprisingly, Excelsior's filing was the lengthiest and contained the most requests and issues. Apparently they still have enough money for extensive legal services.
EXCELSIOR ENERGY'S REQUEST FOR APPOINTMENT OF AN INDEPENDENT EXPERT EVALUATION FIRM, REQUEST FOR CORRECTION AND CLARIFICATION OF THE AUGUST 30, 2007 COMMISSION ORDER, PROTECTIVE PETITION FOR RECONSIDERATION AND REHEARING OF THE AUGUST 30, 2007 COMMISSION ORDER, AND REQUEST FOR DEFERRAL OF DECISION ON THE MERITS
1. Appointment of independent third-party expert evaluation firm to work with Xcel and EE to identify and present to the Commission the optimal terms and conditions for the PPA (who pays?)
2. Correct four typographical errors that give wrong numbers for statutory citations.
3. Reconsider and rehear specific issues:
• The PUC exceeded its authority by considering need and other public interest factors;
• The PUC applied an erroneous "least cost" standard;
• Evidence in the record does not support the PUC's:
• Findings on comparative costs;
• Findings on cost certainty;
• Findings on carbon dioxide; and
• Determinations that PPA not in the public interest.
Aside from these minor points, EE liked the order just fine.
4. EE suggests that perhaps the PUC's 8/30/07 order was interim rather than final, and if so, the PUC should defer any rehearing and reconsideration until after the independent evaluation process is complete and the PUC determines statewide need and allocation of the project's output. EE notes that this could potentially limit any possible appeals in the meantime.
CAMPers should note that this could be an attempt to keep the Mesaba Project in limbo and alive long enough to try to come up with some more public subsidies and legislated benefits. Wonder how MP feels about having its right to appeal delayed? We'll find out soon because the parties' replies are due within a few days.
Minn. Rule 7829.3000 provides that the PUC shall decide these petitions with or without a hearing or oral argument.
Minn. Stat. 216B.27 provides that:
• The PUC has sixty days to decide whether to grant a rehearing or the application is deemed denied;
• If the PUC determines that the original order was unlawful or unreasonable, it can change it; and
• No order of the PUC shall become effective while an application for a rehearing or a rehearing is pending.
If the PUC uses up the entire 60 days, it could be months before we know whether the PPA order will be appealed to the courts. Meanwhile, it looks like the 8/30/07 order is ineffective. Does this mean Xcel doesn't have to negotiate with Excelsior until this is resolved?
OTHER INTERESTING STATEMENTS
Recently discovered e-mail by Janet Gonzalez, Energy Unit Manager at the PUC:
"This is one of the most controversial cases the Commission has had to deal with in a number of years."
It's reassuring to know it's not just our opinion.
CONOCO PHILLIPS' SPIN ON THE PUC'S DENIAL OF THE PPA
See Conoco Phillips' 8/3/07 report on all of its gasification projects at:
The report includes the PUC's determination that the Mesaba PPA is "not in the public interest" and then explains Mesaba's problems:
"Mesaba Energy Project Status - What happened?"
- Capital cost escalation
- Drive for Coal Plants to capture carbon NOW
- Xcel has reduced its load forecast to 325 MW and proposed wind and hydro to fill need.
- Strong local opposition - NIMBY groups masquerading and fundraising as environmentalists.
- State may have retreated from position of supporting economic development for Iron Range Area".
Now environmentalists are the good guys? But what are those NIMBY groups really up to behind their masks?
CAMPers could take pride in such recognition by Conoco Phillips, but it appears that we are being used in its campaign to portray failure of the Mesaba Project as separate and unrelated to its wonderful and promising gasification technology.
ALJ RE: Phase II of PPA - PUC Should Deny Excelsior's Petiton
September 17, 2007
On September 14, 2007, an ALJ recommended that the Public Utilities Commission deny Excelsior Energy's request that Xcel Energy be required to purchase 13% of its energy from Mesaba Units 1 and 2 by 2013.
Excelsior Energy filed a Petition with the PUC in December 2005 to force Xcel Energy to purchase Mesaba's output pursuant to two statutes passed in 2003. In April 2006 the PUC said it would address three issues:
1) Whether to approve the PPA (Minn. Stat. 216B.1694);
2) Whether Xcel would be obliged to use Mesaba's output for at least 2% of its energy (Minn. Stat. 216B.1693); and
3) Whether at least 13% of Xcel's retail energy should come from Mesaba by 2013.
Decisions on the first two issues were recommended by two Administrative Law Judges in a 4/12/07 report. In its August order the PUC chose not to approve the PPA proposed by Excelsior (see our earlier report for more detail). The PUC did not act on issue #2, although the ALJs had recommended against requiring Xcel to purchase the 2%.
ISSUE #3 - MUST AT LEAST 13% OF XCEL'S RETAIL ENERGY COME FROM MESABA BY 2013?
ALJ Bruce H. Johnson's short answer is "NO" because Mesaba's energy is not likely to be a least-cost resource. However, it's not that simple, as evidenced by the fact that the report numbers 39 pages. Find the report by going to:
Enter docket no. 05-1993.
The decision will be made by the PUC at a public hearing some time after the parties have had 30 days to file their objections and replies.
FINDINGS OF FACT
The ALJ noted that the PUC had already concluded in its August order regarding the PPA that the power from Mesaba Unit 1 would cost Xcel Energy about 30% more than other comparable sources. He found that in order to require Xcel to purchase 13% of its power from Mesaba, the PUC would have to:
• First find that the Project qualifies for the 2% minimum; and then
• Conclude that it is likely to be the least-cost resource for 13% of Xcel's need; and
• Find that this would not be contrary to the public interest.
The ALJ noted: in Phase 1 the ALJs found that Mesaba was not likely to be a least-cost resource to provide 2% of Xcel's energy; and it is even less likely to be a least-cost resource to supply 13%.
CONCLUSIONS OF LAW
The ALJ concluded that the Mesaba Project and its technology do not satisfy the requirements of Minn. Stat. 216B.1693 because it is not likely to be a least-cost resource and that it would be contrary to the public interest for it to supply 13% of Xcel's retail load starting in 2012.
IS THE CLOCK RUNNING OUT?
A significant finding by the ALJ is that the opportunity to require Xcel to purchase at least 2% of its energy from Mesaba EXPIRES ON JANUARY 1, 2012, and the power won't be available to Xcel until 2014, according to a realistic timetable.
The ALJ notes that: Excelsior Energy disputes this interpretation of the statute; and the PUC may consider the expiration date to be 12/31/13.
CAMPers: STAY TUNED
The PUC's DECISIONS on ISSUES #2 and #3 and could be vital to the survival of the Mesaba Project.
Mesaba's problems could also lead to new attempts for MORE SPECIAL LEGISLATION.
Meanwhile, we still have the PUC's NON-DECISION ON THE PPA - requiring that Xcel continue negotiating with Excelsior and that other utiltities consider Mesaba as a source in their upcoming resource plans.
And we're still waiting for the federal Dept. of Energy to release the DRAFT ENVIRONMENTAL IMPACT STATEMENT.
WE'LL BE WATCHING ON ALL FRONTS.
CAMP UPDATE: PUC Issues PPA Order
September 4, 2007
The Minnesota Public Utilities Commission issued its Order on August 30th, "Disapproving" the Power Purchase Agreement between Excelsior Energy and Xcel Energy. The 24-page document can be found at:
The Order amplifies the PUC's earlier statement, which we sent on August 4th and we discussed further on August 21st. It contains two provisions designed to keep open the possibility that Mesaba's output might find a buyer.
PROVISIONS IN PUC'S ORDER & CAMP'S REACTION
"Excelsior and Xcel shall resume their negotiations toward a final power purchase agreement, with the assistance of the Department of Commerce and in light of the guidance provided by the Commission in this case."
It is hard to see how renewed negotiations can be productive, given the fundamental cost and risk problems that the PUC acknowledges as "legitimate barriers" that are "likely to impose unreasonable and excessive costs on Xcel's ratepayers".
"The Commission will explore the potential for a statewide market for the innovative energy project's power . . . both in the context of upcoming resource plan proceedings and in other cases in which the Commission reviews (a) requests to build or expand fossil-fuel-fired generation facilities or (b) requests to enter into power purchase agreements with those facilities for terms longer than five years."
This refers to the statutory requirement that other utilities consider Mesaba as a supply option. The PUC explains it as "spreading the . . . challenges of cost, pricing, and rates . . . among more than one set of ratepayers (to) make those challenges more manageable." The PUC promises to "explore that possibility in the months ahead".
This requirement could also be applied in the case involving new transmission facilities in Minnesota for the output of Big Stone II, a 630 MW coal-fired plant planned in South Dakota. The Administrative Law Judges recently found that the energy is needed by several Minnesota utiltites and recommended that the route permits be granted. However, the ALJs also found that the utilities requesting the new lines did not adequately consider using Mesaba's output as a supply option. This case will be decided by the PUC, which could make Mesaba a serious issue.
CAMP will be watching developments in the BS II case and in the upcoming IRP proceedings at the PUC, which are referenced as follows:
"Resource plan filings are imminent from Xcel, Minnesota Power, and Great River Energy, three of the state's largest generators of electricity and purchasers of wholesale power. These resource plan proceedings should provide a good starting point for examining how Mesaba might contribute to meeting the state's intermediate and long-term power needs and how that contribution would affect rates, reliability, and other public-interest concerns."
KEY QUESTIONS & CAMP'S RESPONSES
Can a PPA be successfully negotiated that meets Excelsior's needs and overcomes Xcel's objections and the deficiencies identified by the PUC?
Highly unlikely, given the PPA's fundamental flaws and the failed efforts over the past three years.
Can the PUC force the other utilities in the state to incorporate Mesaba's output as they plan to meet their needs for new baseload generation?
Not likely, if the PUC applies a true public interest test (need, cost and risk) and takes into account Mesaba's lack of a meaningful plan to capture and sequester CO2.
How long can Excelsior Energy survive without new cash infusions?
That probably depends on how much of the $22 million in DOE funding has not yet been spent and whether the DOE is willing to continue funding in light of the disapproved PPA.
Private investments aren't likely in the absence of an approved PPA.
We expect that no additional public funds will be provided. WE'LL BE ON THE LOOKOUT FOR THAT, TOO.
Mesaba's Power Purchase Agreement at the Public Utilities Commission
August 21, 2007
The Minnesota Public Utilities Commission did not approve the power purchase agreement that the Mesaba Project needs with Xcel Energy because it "is not in the public interest as currently drafted".
However, rather than finally denying the PPA, the PUC "requested" that Excelsior, Xcel, and the Department of Commerce continue negotiating.
The PUC identified deficiencies in the proposed PPA to include: the absence of a fixed price at a reasonable level; inadequate ratepayer protections from operational and financial risks; and the need to further develop plans to capture and sequester carbon. These deficiencies are fundamental and will be difficult, if not impossible, to overcome.
We will need to see the PUC's order and detailed findings of fact before we can know exactly what it's doing and that may take a few more weeks. In the meantime, here's our analysis of the Project's status.
PUC'S FINDING THAT MESABA IS AN INNOVATIVE ENERGY PROJECT
The PUC's finding that Mesaba is an Innovative Energy Project reversed the ALJs' recommendations and keeps Mesaba entitled to the special benefits listed in the 2003 legislation.
One of these benefits is of increased significance because the PUC could use its authority over all new generation facilities to pressure all of the state's utilities to use Mesaba's output. However, the test would be whether that is in the best interest of ratepayers and the PUC also unanimously agreed that Mesaba's power would be too costly. It is hard to imagine what benefits the PUC might find sufficient to counterbalance this cost issue.
It is expected that as the various utilities present their Integrated Resource Plans to the PUC, they will be required to show that they "considered" Mesaba as a supply option, and to show why it is not suitable. IRPs from Xcel, Minnesota Power, and Great River Energy are due in November and December of this year. We will be watching for developments on that front.
The PUC met on July 31st and August 2nd to hear arguments from the parties. On the first day 40 CAMPers rode our chartered bus to St. Paul and several more met us there to create a significant presence in the room. Co-Chair Ed Anderson ably presented CAMP's perspective to the PUC. We all agreed that Excelsior's Mesaba Project did not fare well that day and its proponents appeared to be disconcerted.
By Thursday morning the Excelsior team had regrouped and was encouraging the PUC to approve the PPA in some form, even by modifying it to 450 MWs (vs. 603 MWs proposed), and delaying the production date. Excelsior emphasized that it needed some favorable word on the PPA to support its application for $130 million in federal tax credits, which must be filed by October 1st. Without these tax credits, the costs of Mesaba's power could increase by another 10%. Nevertheless, the PUC did not set any deadline for results from negotiations with Xcel or for identifying how Mesaba's output could be marketed to all of Minnesota's utilities. This may leave the Project with a critical timing problem.
Time and Money>
Since the hearing we have learned that, in addition to the deadline for applying for the federal tax credits, Excelsior had another reason for needing a 450 MW PPA. Its first interest payment on its first "loan" from Iron Range Resources was due in May 2007. Tom Micheletti requested an extension and in late July Commissioner Sandy Layman granted one until the end of 2007. She also said that an extension to the end of 2009 would be granted if, by the end of 2007, Excelsior achieved: either an approved PPA for 450 MWs; or a third-party equity investment of $100 million. These two conditions are so interdependent that it is unlikely that Excelsior will get one without the other.
Is Excelsior running out of money and therefore time to continue promoting the Mesaba Project? Apparently the entire $9.5 million from IRR has been spent. We don't know how much of the initial $22 million from the Department of Energy has been spent but we do know that in order for the Agreement with DOE to continue, Excelsior needs a PPA or some other suitable agreement for selling its output. At least three-fourths of this year's $2 million installment from the state's Renewable Development Fund in addition to two previous installments have been spent. Even though the PUC did not pronounce a death sentence for the Project, it may not survive much more delay.
The World and Micheletti Keep On Spinning
Nevertheless, Tom Micheletti continues to spin the Project as alive and doing well, as shown by his "update" to the Itasca County Commissioners on August 14th. He claimed that: the PUC is going to "force" utilities to participate in a PPA with Mesaba; the PUC wants to spread Mesaba's "benefits" statewide; Mesaba would provide baseload "desperately" needed locally; and the Project would be a low-cost alternative for the region. All this despite: Excelsior's fight to prevent the PUC from considering the need for Mesaba; and the PUC's unanimous finding that the power in the proposed PPA was too costly and the risks were too great to impose on Xcel's ratepayers.
CAMP UPDATE: MPUC Update
August 3, 2007
MINNESOTA PUC DECIDES NOT TO DECIDE ON POWER PURCHASE AGREEMENT (PPA)
About 50 CAMPers attended the session for oral arguments at the Minnesota Public Utilities Commission in St. Paul on July 31st. All were impressed with the quality of the case put on by Xcel Energy and other parties in opposition to Excelsior Energy's proposed PPA. A smaller number attended the second day of arguments and the PUC's deliberations on August 2nd.
The key question before the Public Utilities Commission was whether to force Xcel into a long-term contract to purchase the output of Mesaba I. This is critical to Excelsior's ability to: receive additional federal financial support; and attract private funding.
The PUC unanimously decided not to approve the terms of the PPA as currently proposed. However, the PUC left open the possibility that somehow a mutually acceptable PPA might yet be negotiated. They did not establish any particular time for the end of negotiations.
Time is a serious concern for Excelsior, particularly the deadline of October 1, 2007, for applying for at least $100 million in federal tax credits. Its chances of being awarded these credits will be lower if it doesn't have an approved PPA. Without the credits, the cost of its power will increase significantly, making the Project even more untenable.
The PUC decision has not yet been put in writing, so it is difficult to say how they expect the parties to overcome the obstacles to a mutually agreeable PPA (Xcel says it doesn't need the power and it is too costly). The PUC is expected to issue a statement soon. It should also issue a detailed order with findings in a few weeks.
We'll keep you informed of this and other developments - the draft environmental impact statement is now expected to be released in mid-August.
The bottom line is that five Commissioners found:
1. Excelsior Energy's Mesaba Unit I meets the statutory definition of an Innovative Energy Project.
(This reverses the findings of the Administrative Law Judges and allows Mesaba to continue to claim the special privileges in the 2003 statute such as: entitlement to a PPA; exemption from a Certificate of Need; eminent domain power; $10 million from the Renewable Development Fund.)
2. The PPA as currently drafted is not in the public interest but Excelsior, Xcel and the Department of Commerce are requested to continue to negotiate toward a final PPA.
3. The Mesaba Project is not a least cost resource for Xcel and so Xcel is not required to purchase at least 2% of its retail energy from the Project.
CAMPers all hoped that this PUC decision would put an end to the Mesaba Project. That may eventually be the result but in the meantime we have to continue our opposition.
AND WE WILL!
Wall Street Journal deals major blow for Excelsior Energy
July 25, 2007
This is a major blow for Excelsior Energy! The PUC and potential investors can't ignore the numbers below. Read on...
The following is an excerpt from the Wall Street Journal's recent article entitled: "Coal's Doubters Block New Wave of Power Plants" by Rebecca Smith
Even proposals to build so-called “clean coal” plants have been met with skepticism. This new technology, which primarily involves converting coal into a combustible gas for electricity generation, has been touted as a solution to coal’s global-warming problems.
A hearing judge at the Minnesota Public Utilities Commission is urging commissioners to reject a plan for Northern States Power Co., a unit of Xcel Energy Inc., Minneapolis, to buy about 8% of its electricity from a coal-gasification power plant that was proposed by Excelsior Energy Inc., Minnetonka, Minn. The judge concluded the 600-megawatt Excelsior plant wouldn’t be a good deal for consumers.
The judge concluded it would cost an extra $472.3 million, in 2011 dollars, to make the power plant capable of capturing about 30% of its carbon dioxide emissions, and another $635.4 million to build a pipeline to move the greenhouse gas to the nearest deep geologic storage in Alberta, Canada. Thus, $1.1 billion in pollution controls had the potential to inflate the cost of power coming from the plant by $50 a megawatt hour, making electricity from Excelsior twice as costly as power from many older coal-fired plants that simply vent their carbon dioxide. The recommendation will be considered by the commission on Aug. 2.
To see the complete article, go to www.legalectric.org