The arguments over Excelsior Energy

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The proceedings are intended to make a very simple decision over a very complicated project.

An administrative judge will advise the Public Utilities Commission early next year whether Minneapolis-based Xcel Energy will have to purchase the electric output of Excelsior Energy's proposed Mesaba Energy Project.

Isn't that funny, that the single largest polluter in northeastern Minnesota would take the position that a new, clean technology, whose emissions are a fraction of their plants, would say that we're the environmental problem?

Without a dedicated customer, the Iron Range coal gasification power plant won't get built.

To make that decision, state statute says the judge will consider two things -- whether the project can be the low-cost electricity producer; and whether the project is in the public interest.

The opponents are lining up to argue the Mesaba project does neither.

An expert for the Minnesota Department of Commerce says the project is not likely to produce low cost electricity. And that worries the state's business community. Bill Blazar is with the Minnesota Chamber of Commerce.

"If the analysis shows that the electric rates for Xcel customers would be higher than they otherwise would be, then we need to figure out the impact on jobs and the economy of that, and if it turns out that it's negative, then I think we've got to scratch our heads and question ourselves whether the project is in the public interest," Blazar says.

Blazar wonders how well the public is served if Xcel's customers in places like St. Cloud, Winona, and the Twin Cities have to pick up the bill for economic development on the Iron Range.

He also worries about the gasification plant's unproven technology, at least on this scale.

The project is intended to burn a synthetic gas from coal, but it can burn natural gas instead, say, if the coal gasification unit isn't working.

"And that is troubling to business customers, because natural gas is expensive," says Blazar. "The electricity that it produces is expensive. And a lot of manufacturers use natural gas for other processes. And to the extent that we use it to generate electricity, it tends to drive up the cost of the commodity."

Others argue that the power plant has no place in northeast Minnesota.

Margaret Hodnik, with Duluth-based Minnesota Power, says the Iron Range already faces stringent federal pollution rules because of Voyageurs National Park and the Boundary Waters Canoe Area Wilderness. There are several major industries proposed for the Iron Range, and each would add pollution to the same air shed.

"We think that it's going to be very challenging to permit all these projects and fit them in," Hodnik says. "Probably not all of them will happen, but if the Mesaba project is built it will have emissions, and it will take up some of this air-shed, as it's called. And so that air-shed will not be available for other projects that may come in."

Hodnik says the Iron Range is better suited for projects based on the region's minerals or timber. And she argues that new pollution equipment can make even older coal-fired plants almost as clean as integrated coal gasification plants like the Mesaba Energy Project.

"IGCC plants, the type of technology they proposed, as compared to a modern super-critical coal plant, which is a more traditional technology, is not significantly better," Hodnik says. "It's a few percentage points better on the emissions in question, but it's not significantly better."

But that's just wrong, according to Tom Micheletti, co-president of the company behind the Mesaba Energy Project.

"Isn't that funny that the single largest polluter in northeastern Minnesota, by far, would take the position that a new, clean technology, whose emissions are a fraction of their plants, would say that we're the environmental problem?" Micheletti says. "It borders on the ludicrous."

According to Micheletti, pollution reductions underway at Minnesota Power's coal-fired plants will provide more than enough air-shed to permit not only his power plant, but other proposed Iron Range Industries as well. He says gasification is proven much cleaner by all measures than conventional coal. And he says his experts have demonstrated that the Mesaba Energy Project will produce electricity cheaper than any other available source.

"And it's unchallenged in the record, the costs that are associated with a pulverized coal plant, and the costs that are associated with our plant," Micheletti says. "And so I think what you're seeing here is the utilities doing essentially all that they can to prevent competition."

As the least cost provider, Micheletti says, it's an easy argument the project will be in the public interest.

"Given that fact, almost by definition, the electricity from our plant will be of benefit throughout the entire state by all of those who use it," Micheletti says. "Because the alternatives that they face are higher costs, probably, and probably dirtier power plants."

But there's more to go into the cost equation, according to Carol Overland, an attorney representing a citizen's group opposed to the project. Overland argues the real costs should include direct costs like government investment, and indirect costs such as from pollution.

"You've got local governments taking on putting in a railroad, putting in transmission lines, putting in gas service," says Overland. "You've got the water - process water - 6,500 gallons a minute coming in. How much going out? There will have to be a treatment plant to deal with the really serious things like arsenic, selenium, cyanide, that are in the water. What will that cost?"

Overland agreed only reluctantly to the cancellation of this week's public expert testimony.

"For those of us without resources, and without the ability to hire expert witnesses for tens of thousands of dollars, we get our exhibits and our evidence in through cross examination," Overland says. "So, ... to give that up, that's significant. And I am queasy about it."

There will still be opportunity for public input in open forums. The Public Utilities Commission has scheduled hearings in St. Paul, Hoyt Lakes, and Taconite in late December.

The administrative judge's recommendation is expected in February. But his role is only advisory. The final decision rests with the Public Utilities Commission.