Feds take Iron Range coal gasification plant off list

A controversial $1.4 billion coal gasification plant planned near Bovey has fallen off a list of the U.S Department of Energy's priority projects, which critics of the project say is a signal it may have stalled.

(2008 file / News Tribune)

A controversial $1.4 billion coal gasification plant planned near Bovey has fallen off a list of the U.S Department of Energy's priority projects, which critics of the project say is a signal it may have stalled.

For about the past five years the Mesaba Energy Project, led by Minnetonka, Minn.-based Excelsior Energy, could reliably be found on a Department of Energy chart tracking the progress of key projects in which it has invested. But the project is notably absent from the department's latest chart.

When asked why the Mesaba Energy Project was taken off the tracking chart, Tiffany Edwards, a DOE representative, would say only that the removal was because of the completion of a final Environmental Impact Statement in November.

However, other uncompleted energy projects that also have obtained their final Environmental Impact Statements remain on the chart.

That chart includes coal projects in Texas, West Virginia, Illinois and Indiana, as well as projects involving renewable energy, improved transmission and nuclear power.


Charlotte Neigh, a vocal critic of the project and member of Citizens Against the Mesaba Project -- commonly known by its acronym CAMP -- takes the omission as an indication the project may be running out of gas and losing favor.

She pointed out that other coal projects remaining on the DOE chart all involve some sort of plan to capture and store greenhouse gases on-site. This is a feature lacking in Mesaba's design, despite an earlier proposal that carbon dioxide from the facility might be captured and moved by pipeline to oil fields in the Dakotas. That idea was not deemed feasible.

People concerned about global warming, as well as others concerned about air pollution from the region's existing industries, such as mining, have opposed Mesaba Energy from its outset.

But Thomas Osteraas, Excelsior Energy's senior vice president and general counsel, on Wednesday said he still believes the project will be completed.

"We remain committed to moving the project forward, and we continue to do that," he said.

Osteraas said the project is no longer on the DOE priority list, because the final Environmental Impact Statement had been completed.

He added that the company is working with the Minnesota Pollution Control Agency to obtain air permits for the project.

When asked about the financial health of Excelsior, Osteraas said he was not at liberty to talk about finances but offered assurances that the company continues to make progress toward its goal of building a power plant. Ultimately, Excelsior aims to construct two 600-megawatt generators. They would be fueled by coal that has been converted into a synthetic gas that will burn more cleanly than conventional pulverized coal.


Excelsior estimates its project would provide employment for more than 1,500 people during the plant's construction. Another 107 people could be employed to run the finished facility.

In March, Excelsior announced that the Minnesota Public Utilities Commission had approved a plant site permit for the project.

But the same commission rejected a power purchase agreement that would have compelled Xcel Energy to buy electricity from the prospective plant. Consequently, Excelsior lacks any guaranteed customer for the power it would produce.

The project has so far received about $22 million in support from the DOE, another $10 million from a state "renewable energy" fund and $9.5 million in the form of a loan from Iron Range Resources.

Although no construction activity has yet occurred, Excelsior Energy has incurred substantial costs related to engineering, legal counsel, environmental studies and permitting activities.

Iron Range Resources Commissioner Sandy Layman said Wednesday her staff continues to monitor the progress of the Mesaba Energy project.

"The agency is aware of the uphill battle, but we continue to stand behind them, recognizing the challenge that they face, absent a power purchase agreement," she said.

Layman pointed to the recent decision of the Iron Range Resources Board of Directors to extend the repayment terms of a $9.5 million loan until December 2017 and said: "The agency wants to give the project the time it needs to be successful. ... We remain patient and cautiously optimistic."

Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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