THE MESABA PROJECT IS DEAD, DEAD, DEAD!  Coal gasification is not happening.  IGCC ist zu ende!  How many silver stakes through its slimy heart will it take?

Once more with feeling:


IGCC doesn’t provide any significant environmental benefit!

IGCC is not in the public interest!

This is from Charlotte Neigh, Co-Chair of Citizens Against the Mesaba Project, who, having reviewed the recent spin-doctoring of Excelsior Energy, and their tentacle-reach toward Minnesota Municipal Utilities — they’re trying to make it look like they’ve got something they haven’t got:

It is not correct to say that the federal government would back 73 percent of the total cost, or that the federal government has “pledged” $800 million in loan guarantees, or that municipal utilities would have to raise only 27 percent of the project costs to secure ownership of Unit 1 of the Mesaba Project.

Excelsior Energy has not yet been awarded any loan guarantees. It is one of eleven final applicants to share in a pool of $4 billion. Excelsior admits that its negotiations with DOE will continue throughout 2009. DOE stated in October 2007 that projects relying upon a smaller guarantee percentage will be given greater weight. Despite this statement, Excelsior repeatedly misled the media and even the PUC about the status of the loan guarantees, suggesting that they would cover 80 percent of the project costs.

Apparently Excelsior is now seeking 73 percent but this is a long way from becoming reality. A key requirement for qualifying is to have an assurance of revenues to be generated from sale of the product. This means a long-term commitment from a customer to purchase the energy. This is why the failure to achieve a PPA with Xcel Energy is critical. Other obstacles are DOE requirements for: credit assessment without a loan guarantee; approval of environmental and other permits; reduced greenhouse gases; and relative amount of cash contributed by the principals.

Now Excelsior is trying to entice municipal utilities into purchasing ownership interests by suggesting that 100 percent ownership can be obtained by raising 27 percent of the costs. Municipal utilities should carefully assess the likelihood that this amount or any loan guarantees at all will be awarded for the Mesaba Project before issuing bonds to finance such a purchase.

More information and analysis about the federal loan guarantees can be found by scrolling down to the October 8, 2007 entry on the CAMP website:

Charlotte Neigh, Co-Chair
Citizens Against the Mesaba Project

Here’s an example of the bogus spin, from Business North — note she can’t even get the announcement time-frame right… Excelsior announced Mesaba in December, 2001, that’s EIGHT years ago:

No customer for controversial energy project

Excelsior Energy targets municipal PUCs in search for a buyer as key May 1 deadline looms.

by Beth Bily

About six years ago in the wake of the permanent closing of LTV Steel Mining in Hoyt Lakes, momentum began to develop behind a project concept, one since celebrated and renounced.

That proposed Mesaba Energy project with a price estimated at $2 billion has moved through various phases of public review to a potentially new location further west. Along the way it has become one of the most vigorously debated economic development initiatives proposed for Minnesota’s Iron Range.

Meanwhile, an important deadline looms that could make or break the project. The Minnesota Public Utilities Commission had ordered talks between Mesaba’s parent, Excelsior Energy, and power giant, Twin Cities-based Xcel Energy. The two sides were directed to negotiate a Power Purchase Agreement (PPA) for the approximate 600 megawatts of electricity Mesaba’s proposed Unit One would produce. That ordered negotiation period ends on May 1 and there is no evidence an agreement will be reached.

Excelsior executives still tout the technology as viable and the project as one that would provide thousands of construction jobs and about 100 permanent jobs in a part of the region with double-digit unemployment.

“Today’s economic environment reminds us of how important this project is,” said Excelsior co-CEO Tom Micheletti. Despite hurdles, he remains confident construction can begin on the Mesaba project at the company’s preferred site near Taconite by the fourth quarter of 2010.

Meanwhile, opponents and critics say the approaching deadline for a PPA with little progress reported is further evidence the project — and its failure to attract a buyer for the power — is unlikely to proceed and has been a drain on public funds.

Blogger Aaron Brown, an Iron Range college instructor, former editor and weekly Hibbing Daily Tribune columnist has called Mesaba Energy a boondoggle more than once on his Web site, In an interview, Brown said his main objection is the lack of critical assessment of the project, despite big unanswered questions.

“The problem with this project is, from the beginning the (Mesaba Energy) company line was accepted as absolute truth, not only by state and federal lawmakers but also in the media,” Brown said.

The biggest of those still unanswered questions:

• Who would buy the power Mesaba would produce?

• Would this truly be a “clean coal” project without full carbon capture, as is proposed?

• Has the public already invested too much with little guarantee of return?

Who’ll buy the power?

The gasification technology process (Integrated Gasification Combined Cycle or IGCC) proposed for Mesaba breaks down coal or coke rather than burning it directly. Essentially, the gases produced then are cooked to produce electricity. The process cleans the coal or coke of many of the usual impurities. But a buyer for the project’s high tech power has been more than elusive.

State legislation enacted in 2003 required Xcel to buy the power as an innovative energy project. In August 2007, following public hearings and much debate, the state’s utility regulatory agency declined to compel Xcel to buy the bulk of Mesaba’s power. The agency denied Excelsior’s request for the PPA on the grounds that it was not in the public interest. Later, it did order the two sides into further negotiations.

The debate surrounding the PPA process produced objections from the state’s utility heavy hitters. Xcel and Minnesota Power both objected to Mesaba’s energy as too costly, a possible 8 to 12 percent higher. Despite the assertion by Excelsior’s principals — Micheletti and his wife, co-CEO Julie Jorgensen — that the Mesaba power can fill a need created by the state’s moratorium on building traditional coal-fired base generating plants, both utilities said the Mesaba power isn’t needed. They were joined in opposition by the Minnesota State Chamber of Commerce, among other business groups, citing concern about the impact on commercial-industrial ratepayers.

The state’s utility industry also has criticized the Mesaba project as risky, given that coal gasification has never been deployed on such a large scale. A 296 megawatt gasification plant in Indiana and a 313 megawatt generator in Florida are the only commercial gasification attempts to date. In its denial of the PPA, the Minnesota Public Utilities Commission cited operational risks with few safeguards for ratepayers.

The opposition from big energy raises Micheletti’s ire. “We could have had 2,000 (construction) people at work right now without this interference from Minnesota’s major utilities,” he said.

But, even if large utility objections are based in limiting competition—as Micheletti suggests—a power plant won’t be built without a customer.

He acknowledges agreement with Xcel is unlikely, but a buyer for the power will be found. Excelsior executives also have met with some local municipal utilities. One meeting, orchestrated by the Minnesota Municipal Utilities Association, was held in Grand Rapids in January. Excelsior’s co-CEO wouldn’t provide details, but confirmed the meeting.

He also acknowledged meetings with Essar Steel Minnesota, the proposed mining-to-steelmaking operation in nearby Nashwauk, as well as others, but wouldn’t name them.

If a municipal utility were interested in project ownership, there certainly would be incentives for both Mesaba and the municipal. Federal loan guarantees mean the government would back 73 percent of the total cost, according to information the company presented at the Grand Rapids meeting. A municipal would need only to raise 27 percent of costs to secure ownership. Furthermore, municipal utilities are not subject to rate review by the state Public Utilities Commission. Having ratemaking autonomy would help municipalities with public electric utilities lure large industrial power users.

Still, risks would come even with the 73 percent federal backing. Locally organized opposition group, Citizens Against the Mesaba Project (CAMP), asks why small, often cash-strapped municipal utilities would accept higher power costs and even the limited risk when large utilities have decided they won’t. Local resident Charlotte Neigh, CAMP co-chairwoman, said Mesaba has yet to complete front end engineering design, making any cost estimate for Mesaba power suspect.

Company timelines indicate that design work is scheduled later this year.

Carbon Capture

Not long after Mesaba was originally proposed at the Hoyt Lakes site, environmentalists began hammering away on the carbon capture issue.

The company has repeatedly called coal gasification a clean coal technology that would significantly reduce sulfur dioxide, nitrous oxide and mercury emissions, compared to traditional coal-fired technology. But Excelsior’s proposal to control carbon dioxide emissions, the biggest greenhouse gas contributor to global warming, has been an environmental non-starter.

Coal gasification technology holds the promise of sequestration or capture of CO2, but Excelsior has filed plans for Mesaba with the state to remove only 30 percent of the expected carbon emissions, possibly more when economically feasible. Those plans include pipelining carbon underground to North Dakota — upping the price tag of the plant’s power.

“Mesaba is in the wrong place,” Neigh said, adding that building the plant near underground capturing capabilities in North Dakota or Canada would make far more sense.

Micheletti counters his company is the only one that’s attempted to deal with carbon capture to any degree. “We’re the only ones who were asked the carbon capture question. No one’s asking Minnesota Power or all the taconite plants what they’re going to do about carbon.”

To date, no final report on the project’s environmental impact has yet been issued. The project’s environmental impact statement, originally due out last year, is scheduled for release in the second quarter after numerous delays.

Government Support and Investment

Mesaba has enjoyed at least its fair share of government support at federal and state levels. That support has remained steadfast, even though the number of permanent jobs estimated for the project has fallen from more than 600 in late 2003 to around 100.

Mesaba’s big government break came in 2003 when state lawmakers passed special legislation for the Mesaba project. It designated Mesaba as an innovative energy project, exempting it from the usual “certificate of need” required of other power proposals and designated Xcel as a dedicated buyer (a buyer that has not materialized through the regulatory proceedings).

The state also provided funding to move the project along. Iron Range Resources (IRR) allocated $9.5 million in unsecured loans: $1.5 million in 2001 and $8 million in 2004. The state loans have been the topic of more recent controversy.

Minnesota’s legislative auditor investigated use of the funds last year following a citizen complaint. The legislative auditor determined nearly $41,000 had been used for “inappropriate, unsupported or duplicate costs” and IRR had exercised inadequate oversight of Excelsor’s use of the funds. Excelsior paid back the questioned amount, denying any wrongdoing.

Late last year at Excelsior’s request, Iron Range Resources also extended the first interest only payments for the two loans from 2008 and 2009, respectively, to Dec. 31, 2010. Most IRR board members supported the extension. One who did not was state Rep. Tom Anzelc, DFL-Balsam, whose district includes the proposed Taconite site. The legislator has been one of the project’s critics.

State Sen. Tom Saxhaug’s district also includes the Mesaba site and he supported the decision, calling Mesaba a “good project.”

Like Anzelc, blogger Brown charges the project has been heavily funded with public dollars with little upfront private investment. Excelsior’s financial statements for 2005 and 2006 indicate the firm had contributed just $60,000 in capital contributions. The report shows 2006 expenses of more than $13 million.

Citing the economic downturn and debate over the use of an unprecedented level of taxpayer dollars to bail out private companies, Brown views the Mesaba project as the worst elements of capitalism and socialism. “If the Range continues down this road, we’ll spend millions and get nothing,” Brown said.

Sandy Layman, IRR commissioner, said the loans to Excelsior were based on the best information available. “At the time, the mining industry was in a state of decline. Iron Range Resources was very interested in planning for future job creation while at the same time there was awareness that new technology was being deployed. Those two drivers came together,” she said.

Layman noted the federal government also has strongly supported the Mesaba project, pledging $800 million in loan guarantees, a $36 million “clean coal technology” grant and federal investment tax credit credits totaling $133.5 million.

Neigh of the CAMP group believes federal support largely came from the Bush Administration’s commitment to so-called clean coal technology. The project also won bipartisan Congressional support from Minnesota’s two U.S. senators, Republican Norm Coleman and Democrat Amy Klobuchar, and from U.S. Rep. James Oberstar, the Democrat representing Northeastern Minnesota.

There is some speculation the Obama administration could support the project. Presidential candidate Barack Obama lauded clean coal technologies during the 2008 campaign. And the federal stimulus package passed in February includes $3.4 billion for clean coal/carbon capture demonstration projects and a $1 billion allocation for fossil energy and research development.

The competition for the latter clean coal research funds includes a proposed 275-megawatt FutureGen project in the president’s home state of Illinois.

Even with continuing federal aid, Mesaba Energy needs a committed power buyer, a hurdle it needs to clear to move the project past the review stage. And time is running out.

Looking through the rear-view mirror at that reality and the project’s numerous setbacks, would IRR support it if it were proposed now for the first time?

Layman won’t speculate. “Mesaba was faced with unforeseen challenges,” she said. “It’s still viable technology.”

Leave a Reply