Legalectric

IGCC on the ropes… or has it been revived?  Hard to tell.

The PUC’s Order is finally out.  It’s the Order, from the August 2, 2007 decision, where the PUC decided it would be “disapproving Power Purchase Agreement” for the Excelsior Energy Mesaba Project.  And that’s very good, but what’s scary about it is written right there in the caption, the part about “resolving to explore the potential for a statewide market for project power under Minn. Stat. 216B.1694, Subd. 5.

PUC Order August 30, 2007

So time to fire up another cup of coffee and read this thing.  I’ll probably have nightmares tonight…

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WTF? I don’t know. I sat there for two days, listened to arguments that required waders, I spouted off occasionally, and was witness to the most nonsensical non-decision I’ve ever seen. What is it? What does it mean? I don’t know. We’ll know more when the formal written Order comes out, but the gist is:

1) The Mesaba Project was found, contrary to the ALJs’s Recommendation, that it IS an Innovative Energy Project; and

2) It is NOT in the public interest; and

3) Excelsior and Xcel are supposed to go back to the table (yeah, right…); and

4) the PUC is going to strong arm other utilities to get together and support an IGCC project in Minnesota.

More later after I finish up with 20 pages of notes from yesterday…

Buy? Option to buy? Lease? Who knows…

Note the article says that “The former LTV Mining location is being considered as a possible site by the Minnesota Public Utilities Commission for the first unit of the Mesaba Energy project…” and that isn’t true — it’s a Hoyt Lakes site under consideration, but it’s NOT the LTV site. The LTV site was the one promoted at the legislature, but it’s NOT the one the PUC and Commerce have evaluated — it’s completely separate!

On the other hand, NOTE THAT BILL HANNA GOT THE PRICE RIGHT!  $2.1-2.3 billion!  Congrats!  It’s about time this reality sinks in!
Excelsior Energy — Lease option OK’d for Hoyt Lakes site

Bill Hanna
Last updated: Saturday, July 14th, 2007 08:51:50 PM

HOYT LAKES — Excelsior Energy, the company that wants to build coal gasification plants across the Iron Range, has struck a deal with Cliffs Erie for an option to buy about 1,400 acres of land in Hoyt Lakes where one of the utility units could be built.

It was an agreement more than five years in the making.

“This is very good news. We’ve been working on this almost since we started the project,” Tom Micheletti, co-president and co-CEO of Excelsior, said in a telephone interview Friday night.

Excelsior will also be announcing Monday two large generator interconnection agreements for the project to secure access to the Midwest electric transmission system.

The double shot of good news for the project is welcome indeed, especially following a disappointing ruling in April by an administrative law judge that recommended the Minnesota Public Utilities Commission deny approval of a power purchase agreement with Xcel Energy — an agreement authorized by the Legislature in 2003 and signed into law by Gov. Tim Pawlenty and an agreement critical to getting the initiative online. It was a ruling Micheletti found offensive, but environmental groups cheered. “The bias in the ruling against us was obvious. It should have been a no-brainer,” he said.

However, Micheletti is hopeful the MPUC will look much more favorably on the project when it meets July 31 for a hearing on it.

The former LTV Mining location is being considered as a possible site by the Minnesota Public Utilities Commission for the first unit of the Mesaba Energy project, a 603 megawatt facility. A site near Taconite, however, is the preferred site with the Hoyt Lakes location the alternate.

“We have invested significant time and effort to locate and study the Cliffs Erie site and have concluded it represents a suitable option for development of the project,” Micheletti said. “We very much appreciate Cliffs Erie’s work and cooperation in making this agreement possible.”

Excelsior officials say the $2.1 billion to $2.3 billion project would make energy from a clean-coal process that includes a carbon capture and sequestration plan, the first in the country, to substantially reduce carbon dioxide emissions. They say it also would provide low mercury emissions.

“No one can touch us on mercury. We are by far the cleanest … 90 percent-plus removal,” Micheletti said.

Excelsior officials estimate that each unit would provide hundreds of jobs and 1 million man hours of construction work. The project has received state and Iron Range Resources Board funds and also federal tax credits that are a key incentive for investors. Micheletti said there are investors, including Conoco-Phillips, quite interested in the project.

The two generator interconnection agreements would be for both the Taconite and Hoyt Lakes sites. They were reached after 32 months of work with the Midwest Independent System Operator. The studies confirmed that the system upgrades will ensure reliable delivery of electricity from the Mesaba Project throughout the MISO region.

“The interconnection agreements are an important milestone,” said Dick Stone, Excelsior’s senior vice president of development and engineering, in a news release. “Under the agreements, the Mesaba Project will fund and Minnesota Power will undertake upgrades to the transmission system that MISO estimates will cost $81.5 million, a figure very close to that estimated by Excelsior and its consultants several years ago.”

Under the agreements, the Mesaba Project will pay the full cost of the transmission upgrades, with MISO reimbursing 50 percent of the costs to reflect a portion of the system-wide benefits.

MISO is the Federal Energy Regulator Commission-approved entity responsible for planning and open access to the regional transmission grid for a region covering 15 states in the Midwest and the Canadian province of Manitoba, involving more than 94,000 miles of transmission lines.

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Bill Hanna can be reached at bill.hanna@mx3.com. To read this story online and comment on it go to www.virginiamn.com.

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(Navy spin test facility)
The spin of this Mesaba ALJs recommendation of denial of the PPA is dizzying:

“The reaction (we received) is that we’ve introduced the most obnoxious kind of project you could ever imagine, rather than introducing the cleanest coal plant in the world,” [Micheletti] said.

Ummmm… this is a surprise? It IS the most obnoxious kind of project you could ever imagine!

From the Grand Rapids Herald Review:

Mesaba Energy Project sees major setback

Than Tibbetts

Herald-Review
Monday, April 16th, 2007 08:14:30 AM

The Mesaba Energy Project could be one unfavorable ruling away from ruin.

Two administrative law judges overseeing Excelsior Energy’s case for a 600-megawatt, coal-fired power plant north of Taconite ruled that the Minnesota Public Utilities Commission should not approve the company’s plans.

The commission, which has the final authority in the matter, is expected to hear the case early this summer.

Judges Steven Mihalchick and Bruce Johnson wrote in their decision that the project is not an “innovative energy project,” language crafted in a 2003 law meant to kick-start development of an integrated gasification combined-cycle, or IGCC, power plant in Minnesota.

The project’s proposed $2 billion price tag meant it would need plenty of public money as well a guaranteed buyer for the plant’s electricity. Mihalchick and Johnson also recommended that the commission scrap the proposed power purchase agreement between Excelsior and St. Paul-based Xcel Energy.

The judges’ ruling — which included stating that the project is not likely to be a least-cost resource — took both proponents and opponents of the project by surprise.

Excelsior CEO Tom Micheletti said it seemed like the judges ignored most of Excelsior’s testimony.

“It flies in the face of everything that’s being discussed about the need to do something about global warming,” he said. “Either they totally ignored our evidence or they just didn’t read it.”

Excelsior officials have touted the power plant as an economic windfall for the area which would create more than 100 permanent, high-paying jobs.

Charlotte Neigh, co-chair of Citizens Against the Mesaba Project, said the ruling was vindication for CAMP members and the hard work they put in to defeating the proposed power plant.

“It demonstrates that some of the reasons that motivated CAMP were valid,” she said of the ruling. “They did an excellent job in that report…and I don’t see how the (public utilities) commissioners could vote any differently.”

If the Mesaba Project has any hopes of getting built, the public utilities commission will have to side with Excelsior and grant a power purchase agreement, Micheletti said, or construction cannot begin.

Carol Overland, an attorney for Mesaba project’s opponents, said the judges made a very strong statement.

“I was really struck by the way they started out by directly saying it’s not an innovative energy project,” she said. “That carries so much weight.”

Excelsior has about three weeks to file exceptions to the judges’ ruling.

Overland said the public utilities commission typically follows administrative law judges’ decisions except for politically charged issues or, in many cases, for Xcel Energy. With many area legislators backing the Mesaba Energy Project, the PUC’s hearing could be interesting, she said.

Peter McDermott, president of the Itasca Economic Development Corp., said the ruling is a disappointment, but still saw a window of possibility.

“I think (Excelsior has) seen stumbling blocks before and gotten around them,” he said. “Whether they can get around this, I don’t know.”

Itasca County Board of Commissioners Chairman Catherine McLynn was at a meeting of the Western Mesaba Planning Board Thursday evening when the news was announced of the judges’ ruling. McLynn said there were representatives from both Excelsior Energy and CAMP at the meeting and all were taken aback by the announcement. But McLynn stated that all, including the county, understand that this decision does not stop the project.

McLynn explained that the board remains “on record as passed by resolution” to be in support of the project should it pass the environmental permitting process. She emphasized the fact that the final decision on whether the project moves forward is not a decision of the county. However, McLynn explained that the county has been active in supporting the construction of infrastructure needed for the Minnesota Steel mill project which would also service the Mesaba Project.

“We will continue to work with Excelsior on terms and agreements that are mutually acceptable,” said McLynn in an interview with the Herald-Review Friday morning.

“We are still in the middle of the fact-finding phase,” McLynn added. “The draft Environmental Impact Statement (EIS) will be released soon and we’re waiting for that piece of information.”

Representative Loren Solberg (DFL-Grand Rapids) said he has always been in support of the states strong review system, “Companies have to respond to the review process.”

Both Overland and Micheletti noted that the ruling could have far-reaching effects. Several IGCC power plants are in the works around the county, and Minnesota was seen as the first large-scale project to test the public’s palate for new coal plants.

Micheletti said Excelsior will continue to work to bring a power plant to Taconite, adding he hopes the public utilities commission has “more experience” with energy issues.

“The reaction (we received) is that we’ve introduced the most obnoxious kind of project you could ever imagine, rather than introducing the cleanest coal plant in the world,” he said.

And a note of congratulations from Stephanie with this original:

I’ll keep it with the line drawing of me falling out of my broken chair, and the very moving photo of her with her assassinated ducks laid out on a board…

The silence is deafening… the email is way too quiet, well, plus my phone reception sucks out here… but here’s a response I received after sending out notification of the ALJ Recommendation to PUC:

Please remove me from your email list you pyschotic freak - pull your head
out of your ass and join the real world.  You and the rest of the CAVE
people do not deal in facts or in reality.

If overaggressive physcotic freaks like you would use your energy for
something productive we might actually find solutions to our problems rather
than being constantly creating new ones.

From someone ostensibly named “Shalom.” Hmmmm…

And just in case you missed it, here’s the ALJs’ Recommendation of Denial:

ALJ RECOMMENDATION – DENIAL OF PPA

One relevant thing that made me snort — consider Pawlenty’s rabid and unjustified support of Mesaba, knowing it was going down in flames — and he had this to say recently per Polinaut:

“For the 900th time, I am not running for Vice President. I don’t want to be Vice President and I’m focused on being governor of the state of Minnesota and have said I will fill out my term.”

That was in the Brainard Dispatch too:

Pawlenty makes clear he wants to stay put

From the Duluth News Tribune, here’s another guy who will have to run for office again, yet here he is, pontificating on Mesaba’s demise:

“I’m disappointed,” said Sen. Tom Saxhaug, DFL-Grand Rapids. “But it’s not the Public Utilities Commission [making the recommendation]. We’re still waiting to hear from them.”

And remember, Sen. Tom Saxhaug is the guy who tried to ram through the Mesaba personal property tax exemption without letting the local governments know he’d submitted the bill!!! The county got on him about it and it was QUICKLY amended to include the necessity of a Host Fee Agreement to assure local governments get their fair share instead of getting screwed. He showed just what constituents he was representing in that little maneuver, and he showed his utter disregard for the public interest.

Meanwhile, Tom Micheletti’s not having a very good day.

Also from the Duluth News Tribune, Micheletti’s comments:

On Thursday night, Micheletti said he is “shocked,” by the judges’ conclusions.

“Our lawyers are still reviewing it,” he said. “But it appears it’s entirely negative. It’s totally at odds with the national consensus [on cleaner power plants] and essentially adopts the position of the Minnesota Department of Commerce that the project doesn’t offer any advantages over traditional power plants.”

Micheletti said the conclusions don’t mean the project is dead, but he clearly isconcerned.

“Obviously, something like this takes you back,” Micheletti said. “It’s so at odds with technology that could be a savior.”

Here’s from the STrib:

Coal-to-gas plant dealt a setback by judges

The judges said energy and environmental costs of building and operating the plant outweigh the economic benefit.

By Mike Meyers, Star Tribune

The dream of a $2 billion coal-gasification plant on the Iron Range the was dealt a setback Thursday when two administrative law judges urged the Minnesota Public Utilities Commission to deny the plans of Excelsior Energy, a newcomer power company.

While not binding on regulators, the ruling is filled with warnings, from doubts that the plant will burn coal as cleanly as guaranteed to an opinion that Excelsior would not, as promised, likely deliver electricity at a lower cost than alternative energy suppliers.

After sifting through thousands of pages of testimony in a hotly contested case, judges Steve Mihalchick and Bruce Johnson wrote that the plan is “not in the public interest.”

The judges’ warnings to the utilities commission — which is expected to rule on the project later this year — include cautions about whether risks to Minnesota’s economy would be overshadowed by the benefits of the biggest investment in decades on the troubled Iron Range.

And, in a move that undermines a key argument for building the Excelsior plant, the judges found that the design to transform pulverized coal into gas is not particularly new or innovative.

To build the plant, Excelsior needs a customer. The Legislature four years ago directed Xcel Energy Inc. to buy power from the proposed 600-megawatt plant. But Xcel, in expert testimony, said the power isn’t needed in 2011 when Excelsior’s Mesaba plant is supposed to open.

Xcel argued that Excelsior’s power would cost more than alternatives and put Xcel at financial risk if everything didn’t go according to plan — two arguments the administrative law judges accepted in their findings.

The project would create 3,500 construction jobs from 2008 to 2011, according to Excelsior’s economic consultant, and employ 107 full-time workers to keep the plant running. The company said millions of dollars in benefits would flow to local communities, as well.

But the judges were skeptical. “There are economic development benefits to the state from the project, especially to the nearby area,” they wrote. “There are also negative economic development impacts from the increased costs that will be passed on to business and individual ratepayers and from the negative environmental consequences of the project.

“Overall, the economic development benefits weigh in favor of the project. But they do not justify an unreasonable price for its electric capacity and energy.”

Excelsior officials were unavailable for comment.

Xcel offered a cautious response:

“We have not had the opportunity to review the administrative law judges’ report in detail,” said Judy Poferl, Xcel director of regulatory administration. “We appreciate that the judges recognized the concerns raised by the parties to this proceeding. We will continue to participate in this case and look forward to resolution by the Minnesota Public Utilities Commission.”

The commission is expected to rule on the proposal this summer.

Mike Meyers • 612-673-1746 • meyers@startribune.com