Report: Excelsior Energy project could run out of gas

Excelsior Energy, once hailed as an innovative project that would bring jobs to Minnesota's Iron Range while cleanly tapping America's abundant coal supply, is in danger of running out of gas if it can't attract additional investments from the public or private sector soon, the Duluth News Tribune reported.

While significant work has gone into planning, engineering and garnering permits, Excelsior has yet to move a shovelful of dirt or find a customer for the power it would produce, the newspaper reported in a two-part series this week (part one and part two).

The project, which morphed from a $2.1 billion clean-coal technology power plant when it was proposed in 2001 into a conventional natural gas-fired plant, has already burned through nearly $20 million in state finding. And it will soon exhaust more than $22 million in federal funding, according to records the newspaper obtained through the Freedom of Information Act. Those records show that as of last Sept. 30, Excelsior had only about $1.9 million in unobligated Department of Energy funds still available.

"At the end of the day, this is a project that has not hired one full-time worker on the Iron Range. Only lawyers, lobbyists and professional meeting attenders have gotten jobs," said Rep. Tom Anzelc, D-Balsam Township, the only Iron Range legislator who opposes the project.

Tom Micheletti, Excelsior's co-president and CEO, refused to say how much money the company has left or where it will turn next, but he projected confidence in the project's future.

"We've got staying power to see our way through this," the Hibbing native and former Northern States Power executive told the newspaper.

Micheletti said the project has suffered from the economic slump, which has cut demand for power and the need for new facilities. He said he's stopped predicting when Excelsior will be built.

"It bothers me that, given the current economic situation, we're not where we thought we'd be," he said. "By now, 3,000 people would be working on the site if things had gone the way we thought."

Despite receiving virtually all of its backing from taxpayers, the company's spending records, including its officers' paychecks, remain secret, the News Tribune reported.

Before 2008, the financial reports that the company is required to submit to the state Iron Range Resources and Rehabilitation Board as part of its loan agreement had been public data. But the Legislature changed state law at the request of the regional development agency to make those records private. Sheryl Kochevar, an IRRRB spokeswoman, said its aid recipients should have "privacy protections that are similar to those a business would expect and receive when it is dealing with a bank."

Besides $9.5 million in IRRRB funds, the company also received $10 million in state aid through the Renewable Development Fund, despite objections from environmental groups about tapping that money for a plant designed to run on fossil fuel.

Anzelc, the legislator, said any entity that has received so much taxpayer money ought to be more forthright about how it has spent it. He also said he expects Excelsior to turn to the IRRRB for yet more funding.

But IRRRB Commissioner Tony Sertich said there have been no board discussions about providing aid to Excelsior beyond the loans that it already has received and he doesn't anticipate any further requests.

After Excelsior found itself unable to move ahead on a gasified coal plant, it obtained authorization from the Legislature this past session to proceed initially with a plant fueled by natural gas. Sen. Tom Bakk, D-Cook, said allowing the project to start as a natural gas plant would substantially increase the chance of the coal plant getting built eventually.

Micheletti estimated that a couple of 600-megawatt natural gas-powered units could be built for about $900 million, less than half the estimated cost of the original proposal for a 2,000-megawatt gasified coal plant. One roadblock is that federal money earmarked for clean-coal technology probably could not be used for a natural gas plant, he said.

But Anzelc said Excelsior still lacks a crucial essential: a customer.

While Micheletti would not discuss specifics because of confidentiality concerns, he said Excelsior is in active talks with power buyers.

Pat Mullen, vice president of marketing and public affairs for Minnesota Power, isn't surprised that Excelsior is looking at alternatives.

"Their original project was way too expensive, and it didn't get any traction," Mullen said. "We didn't want it and neither did Xcel."

Xcel Energy and Minnesota Power told regulators they didn't need the power and warned that it would drive up customers' rates. Excelsior sought to compel Xcel Energy to buy its electricity, but the Public Utilities Commission refused.

"We've looked at the energy needs of our customers," Minnesota Power spokeswoman Amy Rutledge said, "and it is clear we have no need for additional power from Excelsior."

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Information from: Duluth News Tribune

(Copyright 2011 by The Associated Press. All Rights Reserved.)

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