Editors note: The need for electric power and its force in economic development is one of the few constants in the Northland economy. Just as certain is the controversy energy projects create as they move through the planning and permitting process.
New clean coal technology, new jobs, increased tax revenue, environmental concerns and utility competition are explored in this series, "Energy in the Northland." The final part of this series looks at a Florida county that treats power plants as a growth industry, clean coal technology at work and other views on the proposed Mesaba Power Plant.
FORT LONESOME, Fla. -- In the small store at a remote southwest Florida crossroad, you can buy a shoulder bag and a broad-brimmed hat and be ready for a day of picking oranges. You can also get directions to the Polk Power Station.
Visitors from all over the world have made their way to the sun-bleached facility, where the Florida landscape changes from agriculture to phosphate, and coal is converted into gas and burned to produce electricity.
Operated by Tampa Electric, the facility is one of the nation's first large-scale commercial "clean coal" generators. It uses coal gasification, the type of technology considered for Excelsior Energy's Mesaba Project, a power generator planned for the old LTV Mine site near Hoyt Lakes.
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In the energy industry the technology is known as IGCC, which stands for integrated gasification combined-cycle facility. The plant combines coal with oxygen to produce a gas which is burned to run the electricity generating turbine. Excess heat and exhaust is recovered to produce steam and more electricity.
The Polk plant is designed to burn coal while limiting emissions and producing usable byproducts in addition to competitively priced power. The Mesaba Project has similar goals with the added objective of creating jobs and sparking economic development.
IGCC is a pet technology of the U.S. Department of Energy. It has labeled the Polk plant "one of the world's cleanest," citing its ability to remove more than 98 percent of the sulfur in coal and convert it to a byproduct, though the department acknowledges that the plant does emit traces of mercury.
The concept for Polk Station dates back to 1989, and the plant went into operation in 1996. Tom Micheletti, co-president and CEO of Excelsior Energy, said they hope to break ground for the Mesaba Project in 2005 or sooner, and it could be online by 2010. Wisconsin Power Company is shooting for 2011 to put its Oak Creek coal gasification plant in operation. Those are just two of a handful of projects that could invest more than $3 billion in the Northland energy industry in the near future.
And in an industry that is very complicated but totally connected, the future is set by the projects with political power.
Meeting expectations
With structures at the Polk power plant shooting hundreds of feet into the air, it dominates the flat Florida landscape. The fenced compound with security gate is not unexpected but serves more to keep out poachers than other types of troublemakers. Ponds on the 4,300 acres teem with tilapia, a popular pan fish that tempts local anglers, said Tampa Electric spokesman Ross Bannister. He frequently takes visitors to the Polk plant, occasionally stopping to point out a sunning alligator or soaring osprey.
The plant releases little visible smoke, steam or odor, but a variety of noises lets visitors know it's running. It runs on coal trucked in from another Tampa Electric plant that gets it by barge.
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"By and large, the plant has performed well and lived up to what it was advertised to do," said general manager Mark J. Hornick, who has managed Polk Station for the past three years. "Environmentally, we're meeting all of our limits and actually exceeding all of them."
He admitted that the reliability of IGCC plants has been an issue. He said Polk and the Wabash plant (West Terre Haute, Ind.) had some initial difficulties because they were large scale-ups and the first of their kind, but he said the problems have been fixed.
Hornick said the gasification reliability equals any conventional coal plant. But if you also consider that it can run on backup fuels, such as oil or biomass, Polk Station is as reliable as a natural gas facility. He said since it was built as a demonstration project, some fail-safe measures were not included.
"It's come to a point now where it's on a par with regular coal," he said. "The efficiency is good, though there are some IGCC plants that are a little more efficient than Polk. If we were to build it again, there are a few lessons learned we would apply, and I would assume they'd do so in Minnesota."
"It's a refinery and a power plant," said engineer John McDaniel, who was involved in the initial plant design and startup. "There are a number of mutual advantages for putting those two technologies together."
"You control the fuel, you control the costs," he said. "Fuel is 60 to 70 percent of the cost of producing power."
According to Tampa Electric, the 250 megawatt (a megawatt is 1 million watts) plant produces enough electricity to serve 75,000 homes. At one time the Mesaba Plant was planned to be a 2,000 megawatt facility. It has since been scaled back to an unspecified smaller size.
It will likely be built in stages, with the initial capacity to provide 450 megawatts of power for Twin Cities based Xcel Energy. Polk Station cost about $607 million (not inflation adjusted) to build, while the cost of Mesaba Project has been estimated at $1.5 billion.
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While the design of Polk Station limits the type of coal it can most efficiently use, Hornick said future plants could be designed to use a wider range of fuel. The gasification plant planned for Oak Creek, Wis., will burn so-called "dirty coal" from Pennsylvania. Micheletti said the Mesaba Project will be built to be able to burn any type coal from the best sources available.
A group called RESET, Responsible Energy for Southeastern Wisconsin's Tomorrow, is opposing Oak Creek, on the grounds there is no such thing as clean-coal technology. It favors natural gas.
As the gasification process at the Polk plant removes sulfur from the coal, an on-site processor converts it to highly concentrated sulfuric acid. The product is sold to the local phosphate industry for fertilizer production.
"It's a value added product; we earn revenue for it," Hornick said. "It's a benefit all the way around."
The acid earns the plant $500,000 to $1 million a year.
He said they are recycling some of the slag material, coal residue left after the gasification process, for use in the cement industry, though some of it goes to a landfill.
The gasification process also produces hydrogen. While Polk leaves it in to be burned, Mesaba may be designed to separate it out for other uses, a direction favored by the federal government.
In terms of maintenance costs, he said IGCC is pretty similar to a pulverized coal plant but needs more maintenance than at a natural gas operation. Hornick does not think the cold climate in northern Minnesota will be an issue, as some plant components perform better in cooler weather.
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In terms of production costs, on an incremental basis, he said Polk Station has the lowest costs on the Tampa Electric system.
"Our fuel costs are the lowest by quite a bit, and we're slightly more efficient," said Hornick. "This plant was relatively expensive on the front end to build, so the debt cost is higher than some of our older plants that were built and are largely depreciated."
As a result, power from the Polk Station goes into the company system, since its the cheapest and most efficient. In that region, only nuclear power is cheaper. For the future, Hornick said the plant is looking at supplementing with renewables such as biomass for up to 5 percent of its fuel.
Creating jobs
Polk Power Station employs 77 full-time workers. The plant runs 24/7 with two 12-hour shifts. Hornick said there are no front-line supervisors; rather, the nonunion employees work in "self-directed" teams. Workers are cross-trained as mechanics and electricians to work in both operations and maintenance, and they rotate as team leaders.
There are pay incentives for performance and acquiring multiple skills. He said a conventional power plant would require a similar size work force. The Mesaba Plant has been promoted as a job creator that would employ an estimated 400 workers. Polk Station was originally permitted as a 1,000 megawatt facility that would have required 210 workers.
Polk County economist Gordon Kettle estimated that power plants have an economic multiplier of 1.4 indirect jobs for each permanent position. He wrote that for every dollar of power plant wages, there is 83 cents in indirect earnings. Kettle said power plant employees -- at $40,000 to $50,000 annually -- make 150 percent or more of the average annual wage for all of Polk County.
In northeast Minnesota, the electric energy industry is part of the utilities sector, which includes more than 1,700 workers earning an average weekly wage of $1,299 or $67,548 a year, according to state figures.
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Economic force
As Hornick pointed out, a number of power plants have located on former phosphate mines in southwest Polk County in the past five years. The mineral is used mainly in fertilizer and plays a large role in the local economy. Phosphate mining has left a lot of land with limited potential, but the reclaimed sites proved ideal for power plants. The county put out the welcome mat and made provisions in its master plan and zoning ordinance for power plants and transmission lines.
According to its 2002 Comprehensive Annual Financial Report, Polk County is recognized as "Florida's Energy Capital." Some existing facilities are expanding, with new plants in various stages of planning. However, some projects have been put on hold due to weak demand, while environmental concerns could affect others.
Power plant items come up often on county agendas. According to the Lakeland Ledger, power plants were a big issue in the last county election. For Polk County the plants are a major source of jobs, taxes and related economic development.
In the case of Polk Station, there will also be recreation opportunities. Tampa Electric plans to turn much of the surplus land into a public park.
"The best return of electric power plants is from ad valorem tax revenue," said Jim DeGennaro, Polk County director of business development services, in a 2002 presentation to the Polk County Power Plant Committee. The committee was created to advise the county on power plant issues.
The figures support his position. Over the past eight years, power plants have paid Polk County about $91 million in property taxes. From 1997 to 2001, Polk Station alone paid an estimated $33 million in personal property and real estate taxes.
The local tax benefits of the Mesaba Project are unknown, since the plant, already planned for a reduced tax area, could end up in one of Gov. Tim Pawlenty's tax free zones. And unlike Polk Station, which had to go through a lengthy siting and permitting process, the Mesaba Project had many of the regulatory road blocks removed by legislation.
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The Polk Station plant did not have one objection filed during the planning process, something not likely to occur in the Northland with the Mesaba Project.
Looking ahead
While the Mesaba Project has state support, some regulatory relief, cheap fuel and emerging technology on its side, some opponents are still saying "whoa!" One of the groups actively fighting the Arrowhead-Weston transmission line opposes the Mesaba Project for a whole range of reasons. And at least one Northland power co-op and a major utility have questions about the project but see positive possibilities as well.
"The demand was just not there like we thought it was going to be," said Jim Roberts, retired vice president of public affairs for Minnesota Power. He was referring to energy projects the company canceled in Grand Rapids and Superior. At the same time the economy was slowing down --1998 to 2002 -- more power capacity became available in the Midwest for a variety of reasons.
Compounding that is the strange economics of energy that has forecasts always showing a shortage. "Those forecasts are valuable, and they're planning tools, but they are not an absolute predictor that 10 years from now we're going to be 500 megawatts short," said Margaret L. Hodnik, Minnesota Power's manager of policy development, strategic accounts and government affairs.
Roberts said Minnesota Power never saw the same future power shortage numbers that Excelsior was anticipating. But the shortage Minnesota Power anticipated would be addressed by current and planned facilities.
"I'm not sure there is a shortage right now," Roberts said. "The fear -- if the economy turns on a dime and picks up and starts roaring again -- is there may be a shortage in a year or 18 months."
If so, Minnesota Power could turn to Taconite Harbor, its own merchant plant, to fill the gap. A merchant plant is one producing power for the open market, rather than filling a specific power need. The term has been applied to the Mesaba Project and the Arrowhead-Weston line in a transmission sense. But Micheletti doesn't believe it accurately reflects Excelsior's plans for the Iron Range plant.
Roberts does credit Excelsior with wisdom for looking at coal as a fuel rather than natural gas, as well as other positive aspects of the project.
"The use of a new technology is wise. The use of clean coal technology is a positive thing," Hodnik said. "The economic development we see as positive, if it's done on a level playing field. ... If the transmission line is done right and the whole thing moves forward on an equal footing, we're comfortable with that."
Putting the Mesaba Project on a level playing field was also a concern of Lake County Power, a co-op serving more than 40,000 homes in northeastern Minnesota.
"A lot more details have to unfold," said Mike Birkeland, Lake Country's manager of communications. "We're certainly interested in the project as an economic development project. It would be wonderful for the area." Like Minnesota Power, Lake Country had opposed an earlier provision that would have given Excelsior retail sales ability.
Attorney Carol A. Overland has a clear position on the Mesaba Project. "We don't need it," she said. "... Excelsior is a private company without a record of any success or visible assets ...."
Overland represents W.O.L.F., the World Organization for Landowner Freedom, which has been in the thick of the Arrowhead-Weston battle and other power project issues.
"By this legislation we have changed and directed energy policy that will last for 30 to 50 years," she said. "Once they build that, no one will be able to demonstrate anywhere else that there is a need for power."
And that, Overland believes, will squelch development of renewable energy sources, as well as setting back distributive generation, which puts small energy plants close to customers.
"We've got a power glut," she said. "Where are they going to sell this energy?"
Overland, along with the Sierra Club, testified against the legislation.
One thing is certain, energy is the Northland's bedrock industry, and proposed projects, whether serving regional needs or producing power for export, will continue to rally both supporters and opposition.
