Legalectric

A couple of days ago, a little birdie sent me an uplifting article, and what I like most about it is the use of the term “boondoggle,” which is the definition of Minnesota’s “own” Mesaba Project:

For Carbon Capture, DOE Moves Oxycombustion Ahead of IGCC

If IEEE’s Spectrum is using that term, the rest of the world can’t be far behind!

We’ve been having quite a few go-rounds about Mesaba lately, since Iron Range Resources unilaterally decided to significantly and substantively alter the “contract” for the $9.5 million in funding.   I’d started a post on that and can’t find it for the life of me, so here we go… Now remember, this is not including the state’s Renewable Development Fund money or the DOE’s money thrown at this project, this is “only” the state IRR’s money, $9.5 million, and the interest on that “loan” is 20%:

MCGP Exhibit 5023 – IRR & Excelsior Convertible Debenture Agreement

You’ll find that interest rate on p. 12, 20% simple interest per annum on the outstanding principal.  Since they’ve paid nothing on it except the $40k that they were found to have spent improperly (with many other issues not addressed because the IRR had “destroyed” documentation… yeah, right…), 20% simple interest per annum on a “loan” from 2004 means that there’s another $8,000,000 due now.  And this does NOT take into account the initial $1.5 million from IRR, it’s just the agreement above.

And as noted above,  a couple of weeks ago, it seems the IRR unilaterally decided to significantly and substantively alter the “contract” … based on exactly what???

Here’s how Commissioner Sandy Layman characterized the predicament:

The principal balance owed by Excelsior Energy, Inc. to Iron Range Resources under the
existing loan documents is $9,454,962.

No mention is made of the more than $10 million in interest.   Nada…

Here are two of Aaron Brown’s posts:

Excelsior Energy to seek huge break from Iron Range Resources

… and …

This Iron Range blogger is done apologizing for Iron Range cronyism

Here’s Charlotte Neigh’s editorial, published in the Grand Rapids Herald-Review and on the Citizens Against the Mesaba Project site:

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.

It’s out,  and although the court rejected the arguments of Excelsior Energy saying they didn’t get enough out of the PUC, and rejected the arguments of Minnesota Power and Xcel Energy, the bottom line is that the Public Utilities Commission won, their Order stands, and so in a small way, Excelsior Energy has “won.”

There were three issues before the court:

I. Did the commission err in determining that the Mesaba project is an IEP under Minn. Stat. § 216B.1694, subd. 1?

II. Does Minn. Stat. § 216B.1694, subd. 2(a)(7), require the commission to undertake its traditional public-interest evaluation?

III. Was the commission’s application of the IEP statute to Excelsior’s PPA arbitrary and capricious or unsupported by substantial evidence?

Bottom line?

We defer to the commission’s expertise as to the definition of the technical term ―traditional technologies.‖ The commission’s decision that the Mesaba project is an IEP is supported by substantial evidence.
The commission has the statutory authority to consider the public interest in evaluating the terms and conditions of an IEP’s PPA. Its decisions in this regard are supported by substantial record evidence and are not arbitrary and capricious. Accordingly, the commission did not err in concluding that Excelsior’s proposed power-purchase agreement with Xcel is not in the public interest under Minn. Stat. § 216B.1694, subd. 2(a)(7).

Here’s the full decision, issued today at 10:00 a.m.

May 18, 2010 Excelsior Energy-Mesaba Project Appellate Decision

Oh happy day…

Here’s the Excelsior Energy Mesaba Project appeal, hot off the “press” from a little birdie:

Excelsior Energy’s appeal of UC’s Mesaba Project decisions

I’d love to weigh in, but the freight’s a little steep for recreational pleadings…

Thanks, little birdie!

So what the hell is a “procedural reconsideration?” Today the PUC had the never-ending (until May 1, 2009) saga of Excelsior Energy’s Mesaba Project. The issue? Yet another Motion to Reconsider from Excelsior Energy, they don’t want to take NO for an answer.

November 25, 2008 Staff Briefing Papers

The PUC staff recommended reaching the hand toward the life-support plug, but not yanking it with a final decision:

Staff acknowledges the comments of Minnesota Power requesting the clarification of whether the Commission’s approval or denial of Excelsior’s petition for reconsideration at this time constitutes a final decision for purposes of appellate review. In the alternative, the Commission will not enter a final decision until May 1, 2009, the deadline for negotiations. As such, Staff believes that the most judicially efficient course would be for the Commission to grant the petition for reconsideration for procedural reasons and hold further consideration in abeyance until after May 1, 2009.

Briefing papers, p. 13. And so they voted unanimously for alternative 1:

Grant the petition for reconsideration and rehearing for procedural reasons and hold further consideration in abeyance until after May 1, 2009.

For the whole Excelsior Energy saga, GO HERE and search for Docket 05-1993. And if that’s not enough, search also for 06-668!

So we’re still holding… zzzzzzzzzzzzzzzz

Above — the mittens (approximation) the judge was wearing at the hearing, big brown leather — DURING the hearing, yes, it was indeed a cold day in hell…

The “siting” hearing for Excelsior Energy’s Mesaba Project was Tuesday and Wednesday, that’s the long dead IGCC/coal gasification plant that keeps hanging on as we beat that equine’s bloated and stinky carcass. It was bizarre, but it’s hard to tell how far back to go in detailing the bizarreness… and I’m a little cranky, having sat most of the 20 degrees below zero day in an unheated gym attached to the Hoyt Lakes Arena (they couldn’t turn the heat on because when they did, the blowers made so much noise we wouldn’t hear anything but the blowers). The first day went pretty well, we did get through a few witnesses with some good issues raised in the record, so good for our side that the second day the process was shut down. They rammed through all the witnesses through at once, before any public questioning was allowed, and it wasn’t until around 7 p.m. or later that we could get started.

How far back to go… It really started back in Big Stone II, I think, but I’ll stick to this docket for now… First large weirdness in this docket was the ALJ’s Prehearing Order granting intervenor status to Xcel, Minnesota Power, and Public Energy-Mesaba (coalition of groups actively challenging Mesaba), and then there was the Prehearing Order that those not submitting prefiled testimony would no longer be intervenors and could not participate as intervenors, only as members of the public! Really!

Fourth Prehearing Order

In that Fourth Prehearing Order, it was noted that there would be a Phase I and Phase II as provided by Minn. R. 1405.1500:

1405.1500 SEQUENCE OF PROCEEDINGS.

Subpart 1. Recess. All hearings shall recess at 11:00 p.m.
unless the administrative law judge determines that the public
interest will best be served in any given hearing by continuing
the hearing beyond 11:00 p.m. The administrative law judge may,
in the judge’s discretion, order a time and place for a
continuance of that hearing.

Subp. 2. Two-stage hearing. The hearing may be scheduled
in two stages. The first stage shall be for the purpose of
introducing into evidence all of the prefiled direct testimony
of the parties, and the cross-examination of each witness by all
other parties. The subsequent stage shall be for the purpose of
allowing all other interested persons to present their direct
testimony and to question witnesses that offered testimony
during the first stage of the hearing process.

Nothing contained herein shall be interpreted so as to
prevent the public from being present during the first stage of
the proceedings or to question witnesses at an appropriate time
during the first stage of the proceedings, should time allow.
The administrative law judge may give priority to those members
of the public desiring to ask questions which would enable them
to better prepare for cross-examination during subsequent stages.
It is the intended purpose of the two-stage process to establish
specific hearing dates for the primary purpose of public
participation in order to avoid inconveniencing the general
public by requiring them to wait until late at each hearing
before having opportunity to offer direct testimony and ask
questions. However, at the discretion of the administrative law
judge, the applicant and other parties may present a brief
summary of the prefiled direct testimony at the beginning of
each session.

Subp. 3. Additional hearing dates. Nothing contained
herein shall be interpreted so as to prevent the administrative
law judge from establishing additional hearing dates on motion
or at the judge’s discretion.

STAT AUTH: MS s 116C.66; 216E.16

HIST: L 1984 c 640 s 32; 17 SR 1279
Current as of 08/21/07

About this time, I saw trouble coming… So anyway, when Xcel, Minnesota Power and Public Energy-Mesaba did not submit Pre-Filed Testimony, we got the ax, we were out as Intervenors. THERE WERE NO INTERVENORS IN THE EXCELSIOR ENERGY – MESABA PROJECT DOCKET!!! That happened in Prehearing Order 5:

Fifth Prehearing Order

which said, in pertinent part:

4. Because they have failed to file testimony when due, Xcel Energy,
Minnesota Power, and Public Energy—Mesaba are denied further participation as
parties in this matter. They shall remain on the service list and may participate as
members of the public and interested persons as set forth in the First Prehearing Order
(January 19, 2007).

So let’s go back to that First Prehearing Order:

First Prehearing Order

Note the foreshadowing:

3. Any person desiring to become a formal party must file a Petition to
Intervene by February 12, 2007. Any person petitioning to intervene after that date may
be restricted as to the scope of their participation. Any existing party that wishes to
object must file an objection within seven days of service of the petition. Petitions to
Intervene should comply with Minn. R. 1400.6200.

5. Members of the public need not become formal parties to participate in the
hearings. Members of the public may offer either oral or written testimony, may offer
exhibits for inclusion in the record and may question the parties’ witnesses as set forth
below.

7. As suggested by Excelsior Energy, and for the greatest convenience of
the public, the two-stage hearing procedure permitted by Minn. R. 1405.1500, subp. 2,
will be used. In Stage One, the prefiled direct testimony of each party’s witnesses shall
be admitted and those witnesses shall be cross-examined by the other parties. If time
allows, limited questioning by other interested persons may be allowed. In Stage Two,
other interested persons may present testimony and may question the witnesses who
offered testimony during Stage One. Interested persons offering testimony may be
questioned by other persons at the hearing.

In the First Prehearing Order, there were to be days and days of hearings, more than two weeks worth! Given there were 20 or so witnesses, that sounds workable:

April 2-6, 2007 Stage One sessions in St. Paul, Taconite, and/or
Hoyt Lakes

April 9-11, 2007 If necessary, additional Stage One sessions in
St. Paul, Taconite, and/or Hoyt Lakes

April 20-24, 2007 If necessary, additional Stage One sessions in
St. Paul, Taconite, and/or Hoyt Lakes

April 25-26, 2007 Stage Two sessions in Taconite and/or Hoyt
Lakes

April 27, 2007 If necessary, additional Stage Two sessions in
Taconite and/or Hoyt Lakes

But all the Intervenors were eliminated and so was the public vetting and gutting of Excelsior Energy’s Mesaba Project. That got it down to two days… TWO DAYS!!!!!! Twenty witnesses in two days. Yup, great record we’ve got here. So under the rules, Minn. R. 1405.1500, Subp. 3, seems it’s time for a Motion…

Stay tuned… highlights and lowlights of the hearing to follow …