Legalectric

Could this be the last post on this? Sure hope so. But it always takes longer than it should…

Kandiyohi’s Midtown Eco-Crapper, er… Eco-Energy… is going down in flames. It’s a so-called biomass plant, and it would spew about a million pounds of pollution ANNUALLY into the atmosphere, PLUS lots of CO2 (how much?) to add to global warming and toxic fallout in the neighborhood and beyond. Great idea… just great…

Well, maybe, just maybe, it won’t be happening. The City of Minneapolis has said that Kandiyohi has not met the requirements for its option on the property, the site for the Eco-Crapper, and the big problem is that they don’t have a Power Purchase Agreement. So says the city:

Interoffice Memorandum
to: Council Members and Mayor Rybak
from: Greg Goeke
subject: Midtown Eco Energy – Option on Purchase Agreement
date: 3/27/2008
cc: Steve Kotke, Pat Born, Shelley Roe

As many of you know, the City has entered into a conditioned Purchase Agreement with Midtown Eco Energy LLC (the developer) for the sale of 2850 20th Ave South. The sale was predicated on the site being developed for a biomass combined heat and power generation facility.

As required by the purchase agreement, the developer would need to meet certain requirements (at specified dates) in order for the sale process to continue towards closing. The developer has submitted documents and a required payment in with the intent of “exercising their option” to purchase the property. The purchase agreement required that the developer initiate this process and meet the “Option Requirements” of the purchase agreement by March 30, 2008. A staff team comprised of Steve Kotke, Pat Born and Shelley Roe has reviewed the documentation submitted by Midtown Eco Energy, LLC.

The Option Requirements are: (as written in the purchase agreement)

4.2.1 pay to Seller (the City) the entire Option Price ($50,000) …….
The Developer has met this requirement.

4.2.2 demonstrate the Buyer (Midtown Eco Energy, LLC) has submitted all necessary application materials to the State of Minnesota’s Pollution Control Agency to request issuance of an air quality permit as necessary to build and operate the Project.
The Developer has met this requirement.

4.2.3 demonstrate that Buyer has submitted all necessary application materials to the City of Minneapolis for a conditional use permit to build and operate the Project.
The Developer has met this requirement.

4.2.4 demonstrate that Buyer has financing commitments for debt and equity sufficient to undertake the Project, which commitments may be reasonably conditioned, as well as a commitment to enter in a power purchase agreement subject also to reasonable conditions.
The Developer has not met this requirement.

4.2.5 provide Seller with a copy of any Title Evidence and Buyer’s Objections ……
The Developer has met this requirement.

It is the staff’s joint professional position that the developer has not sufficiently demonstrated a commitment from a utility provider to enter into a power purchase agreement. The Developer submitted a letter from Xcel Energy dated March 17, 2008 which indicated that Xcel was in negotiations with the developer, but the letter did not indicate a tentative agreement, an agreement in principle or any commitment to enter into an agreement. Additionally, staff was concerned that the letter was written from a mid-level staff person and that such person may not be a person with any authority to speak for Xcel.

A certified letter has been sent to the developer addressing the City’s staff position on the issue. We have offered to meet with the developer and others to address this issue. The developer is entitled to provide additional information any time prior to the March 30, 2008 deadline in order to meet the Option Requirements of the Purchase Agreement.

============================

Midtown Burner project hits snag with the city

By STEVE BRANDT, Star Tribune

March 26, 2008

Minneapolis officials have told the developer of a proposed wood-burning power plant that it hasn’t met a key condition for buying city land for the project.

Midtown Eco Energy was told Wednesday that city officials feel it lacks a commitment from a utility to buy the project’s electricity. That’s required in the option agreement for the land.

The move leaves up in the air the developer’s ability to purchase the site at 2850 20th Av. S., now serving as a city garbage-handling station.

Midtown said in a statement that it is disappointed by the delay. “We will continue our discussions with the city, and hope the matter is resolved as quickly and judiciously as possible,” the statement said.

The option agreement requires Midtown to meet city conditions by Sunday.

Midtown earlier asked to extend that option deadline by five months, but withdrew the request and asserted that it had met all option conditions.

But the city determined that a letter dated last week from Xcel Energy said only that negotiations were underway to sell the project’s power to Xcel, without any tentative commitment. The city also wants a commitment from a higher-level Xcel official.

One thing that’s certain is that the council couldn’t grant an extension by Sunday. That raises the question of whether there’s support on the council for granting a new option.

Opinion in neighborhoods around the controversial project appears to have shifted against the project since it moved from the nonprofit Green Institute to for-profit Kandiyohi Development Partners, the politically connected group behind Midtown. Opposition also developed on environmental grounds.

Meanwhile, the Minnesota Senate’s omnibus environmental bill would require the project to hire 35 percent of its workforce from nearby, require advanced diesel emission controls on trucks hauling wood to the burner, and mandate quarterly reporting of plant pollutants to neighborhoods.

Steve Brandt • 612-673-4438

And what’s up with the Senate Omnious Environmental Bill? It says that the Eco-Crapper would be OK if it meets these conditions?

• hire 35 percent of its workforce from nearby
• require advanced diesel emission controls on trucks hauling wood to the burner
• mandate quarterly reporting of plant pollutants to neighborhoods

SAY WHAT??? Says WHO??? Hmmmm, can’t find the bill…

OK, here it is:

SF 3385, the Environmental Ominous Bill

Starting on p. 4, l. 13:

Sec. 3. Minnesota Statutes 2006, section 116.07, subdivision 4a, is amended to read:
Subd. 4a. Permits. (a) The Pollution Control Agency may issue, continue in
effect or deny permits, under such conditions as it may prescribe for the prevention of
pollution, for the emission of air contaminants, or for the installation or operation of
any emission facility, air contaminant treatment facility, treatment facility, potential air
contaminant storage facility, or storage facility, or any part thereof, or for the sources
or emissions of noise pollution.
The Pollution Control Agency may also issue, continue in effect or deny permits,
under such conditions as it may prescribe for the prevention of pollution, for the storage,
collection, transportation, processing, or disposal of waste, or for the installation or
operation of any system or facility, or any part thereof, related to the storage, collection,
transportation, processing, or disposal of waste.
After July 1, 2008, the agency may issue a new permit to a new facility located in
a community that meets all of the following conditions only if the facility also meets
the conditions of paragraph (b):
(1) is within a half mile of a site designated by the federal government as an EPA superfund site;
(2) a majority of the population are low-income persons of color and American Indians;
(3) a disproportionate percent of the children have childhood lead poisoning, asthma, or other environmentally related health problems;
(4) is located in an urban area that has experienced numerous air quality alert daysof dangerous air quality for sensitive populations between February 2007 and February 2008; and
(5) is located near the junctions of several heavily trafficked state and county highways and two one-way streets which carry both truck and auto traffic.

The Pollution Control Agency may revoke or modify any permit issued under this subdivision and section 116.081 whenever it is necessary, in the opinion of the agency, to prevent or abate pollution.
(b) If a new facility meets the conditions provided in paragraph (a), clauses (1) to (5), then a new permit may be issued by the Pollution Control Agency only if the new facility agrees to:
(1) hire at least 35 percent of the facility’s permanent employees from the community and surrounding neighborhoods within which the facility will be located and target job training and local hiring efforts to residents which meet the criteria listed in paragraph (a), clause (2);
(2) equip all diesel trucks bringing fuel to the facility with advanced filter systems that reduce emissions from diesel exhaust;
(3) report, on a quarterly basis to the community within which the facility is located, actual emissions levels, as measured by the Pollution Control Agency’s 24-hour emissions testing; and
(4) refrain from burning refuse-derived fuel, as defined by section 119.90, at the facility.

(c) The Pollution Control Agency has the authority for approval over the siting, expansion, or operation of a solid waste facility with regard to environmental issues. However, the agency’s issuance of a permit does not release the permittee from any liability, penalty, or duty imposed by any applicable county ordinances. Nothing in this chapter precludes, or shall be construed to preclude, a county from enforcing land use controls, regulations, and ordinances existing at the time of the permit application and adopted pursuant to sections 366.10 to 366.181, 394.21 to 394.37, or 462.351 to 462.365, with regard to the siting, expansion, or operation of a solid waste facility.

EFFECTIVE DATE.This section is effective the day following final enactment.

Here’s the Finance & Commerce article — it’s in Finance & Commerce, it must be real:

Finance and Commerce
Business News

March 28, 2008

Minneapolis “Midtown burner” plan could go up in smoke
by Burl Gilyard Staff Writer

$92 million proposal may be dead as the developer and the city fight over why it hasn’t happened

Michael Krause has long been promoting a wood-burning power plant in south Minneapolis, and his development idea is known as the Midtown Eco Energy facility.

But today, Krause is feeling burned up.

So, too, are officials for city of Minneapolis, which owns the 1.6-acre site where the plant would be built, home to a still-in-use garbage transfer station.

And the councilmember for the Midtown area, Gary Schiff, doesn’t want to spend any more time on the project.

In fact, Krause, a principal with Minneapolis-based Kandiyohi Development Partners, said that his firm is weighing legal action against the city.

Kandiyohi has a contract to purchase the city-owned garbage transfer station at 2850 20th Avenue S. for the $92 million project. But the contract requires Kandiyohi to meet a list of option requirements before a looming March 30 deadline.

City staffers don’t believe that Kandiyohi has met all of the conditions.

Greg Goeke, director of property services for the city’s Department of Public Works, sent a certified letter to the developers on Wednesday, outlining the city’s concern that Kandiyohi has no deal in hand from a utility to buy the power generated at the proposed plant. A separate, internal city memo noted that the city does not believe that Kandiyohi has secured financing for the project.

“[The letter] came as a surprise. We clearly think we’ve met all the requirements for the option,” Krause said.

In response, Krause said that his firm is considering suing the city.

“Yes. If we need to,” Krause said of potential legal action. “And I think that’s clear to everybody.”

City representatives met with the Kandiyohi team on Thursday to discuss the project’s status.

“We are continuing to work and communicate with the developer, but the power purchase agreement requirement hasn’t yet been met,” said Matt Laible, a spokesman for the city.

Krause said that Kandiyohi believes it has demonstrated that Xcel Energy is interested in the project.

A March 17 letter from Xcel Energy to Kandiyohi acknowledges that the utility is “negotiating the terms of a power purchase agreement” at the site, but makes it clear that there is no definitive agreement yet.

Xcel spokeswoman Mary Sandok declined to comment beyond the letter.

Councilmember Schiff, who has supported the project in the past, has become frustrated with the protracted project. The Midtown Eco Energy site is in Schiff’s Ninth Ward.

“They have not made progress on numerous points — we basically have had no communication or progress from them since August,” Schiff said. “They’re stuck in the water, and I don’t think we should be spending more time on it.”

Schiff noted that the developers were already granted a one-year extension on the deal to buy the site, an extension that expires on Sunday.

In a March 2007 letter to the city requesting the extension, Kandiyohi principal Kim Havey wrote, “The primary necessity of the extension is that power purchase negotiations entail a great deal of time and their conclusion is not on any predetermined schedule.”

A year later, Kandiyohi still does not have a deal.

Plans for the long-gestating project date back to 2001, when the nonprofit Green Institute first floated the idea. Krause was then executive director of the Green Institute.

He later left the Green Institute and formed the private Kandiyohi, which took over the burner project and bought the Green Institute’s research.

The city of Minneapolis issued an RFP (request for proposals) in the spring of 2006 to sell the transfer station property and develop a biomass plant. The city drew a single response: from Kandiyohi.

Kandiyohi’s plan calls for a 24.5-megawatt facility that would generate both electricity and heat. The primary fuel source would be wood, but a past Kandiyohi submission to the city also mentioned agricultural byproducts such as cornstalks and corn cobs.

Although the biomass project is touted as eco-friendly, an ad hoc coalition of neighbors, Minneapolis Residents for Clean Air, is organizing against the project.

Jullonne Glad, a member of the group, said that neighbors are concerned about the potential environmental impact of the power plant.

“That area is saturated already, and my concern is the cumulative toxicity. The reason people live there is they don’t have the means to live elsewhere,” Glad said. “We do not feel that our interests and our concerns have been taken into account.”

Krause said that Kandiyohi has been judicious in its environmental review of the project.

“The neighborhood does not have a veto over this project,” Krause said. “We’ve looked at absolutely every detail.”

Two other as-yet unresolved issues for the project are state environmental review and the status of federal production tax credits.

The Minnesota Pollution Control Agency (MPCA) is currently reviewing Kandiyohi’s submitted environmental assessment worksheet (EAW) on the project, which developers submitted in January.

Kevin Kain, an MPCA project manager, said that the MPCA is waiting for some additional information on air emissions from Kandiyohi. He estimates the proposals will be ready for a public comment period in May.

Kain said the comment period should last 45 days, after which the MPCA would review the comments and make its findings.

Federal production tax credits, a financing tool widely used by renewable energy developers, are currently set to expire at the end of the year.

“It’s become a political football,” Krause said of prospects for extending the tax credits.

But those issues are moot if Kandiyohi doesn’t have a site to develop.

Nevertheless, the project still has political support. Jeremy Hanson, spokesman for Minneapolis Mayor R.T. Rybak, said Thursday that Rybak remains a supporter of the plan.

“Mayor Rybak continues to support the Midtown energy project and thinks it’s going to create a good source of alternative energy to help us address global climate change and will provide great jobs in an area of the city that’s very important,” Hanson said.