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Big Stone II deal might not be dead yet, Willmar MUC says

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news Morris, 56267
Morris Minnesota 607 Pacific Avenue 56267

WILLMAR -- The decision by the lead utility to withdraw from the proposed Big Stone II power plant project does not necessarily mean the plant is dead because another utility could join the four remaining utilities that still support construction of the $1.6 billion coal-fired plant in eastern South Dakota.

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But a spokesman for an area environmental or-ganization sees the decision by Otter Tail Power Company of Fergus Falls to pull out of Big Stone as a turning point for the remaining partners to move toward developing a clean energy economy.

Otter Tail announced Friday it was withdrawing -- both as a participating utility and as the project's lead developer -- from Big Stone II.

The proposed 500-to-600 megawatt plant near Milbank, S.D., with related transmission upgrades in Minnesota and South Dakota, would serve more than a million customers in Minnesota, the Dakotas, Montana and Iowa.

The five utilities had worked to line up plant investors and had planned to decide this fall if they would move forward. The vote on whether or not to proceed was taken Friday.

"As I understand it, Otter Tail has a variety of things going on that are affecting its credit and because of that it's decided to pull out of the project,'' said Bruce Gomm, general manager of Willmar Municipal Utilities. "But it doesn't mean that the project has stopped, though.''

As he understood the situation, Central Minnesota Municipal Power Agency of Blue Earth, Heartland Consumer Power District of Madison, S.D., Missouri River Energy Services of Sioux Falls, S.D., and Montana-Dakota Utilities of Bismarck, N.D., still support the project.

Gomm said a new lead developer would need to be identified. Also, he said there is a possibility of other participants joining the project.

"As of right now we don't really know much more than that,'' Gomm said Friday afternoon. "We just know because of financing issues Otter Tail has decided to withdraw from the project.''

In a news release, Otter Tail President Chuck MacFarlane said the broad economic downturn coupled with a high level of uncertainty associated with proposed federal climate legislation and current federal environmental regulation have resulted in challenging credit and equity markets that make proceeding with Big Stone II untenable for Otter Tail customers and shareholders.

Gomm said any kind of carbon tax or carbon cap-and-trade legislation will affect all generation. He said Big Stone will be the most able to deal with it because the design will allow room for equipment to be installed to capture carbon.

"The technology doesn't really exist yet. They don't really know how to do it,'' said Gomm. "But what they're going to do is leave room for equipment ... to get the CO2 out. The project already anticipated that since there is pending legislation, they intended on designing those provisions to make room for equipment to do that.''

Big Stone II was important for Willmar because the utility plans to buy 30 megawatts of power to replace a 30-megawatt contract with Great River Energy that expires in 2015. Willmar's contribution of thousands of dollars toward permitting and initial design costs will be lost if the plant is not built, said Gomm.

"We're disappointed that Otter Tail has withdrawn, but we understand that every utility has all their own issues to deal with and we're looking forward to some new participants stepping up and keeping the project moving,'' he said.

Patrick Moore, executive director of Clean Up the River Environment in Montevideo, said Otter Tail's decision "confirms what we have been saying for a long time that the plant isn't needed. Coal is no longer the cheapest form of energy. The cheapest form of new energy, as Xcel Energy has demonstrated, is wind.''

The independent consultants that reviewed Big Stone's transmission permit requests said the power that Big Stone would produce could be made up by greater efficiency and a combination of wind turbines and natural gas peaking plants, according to Moore.

"During the administrative law judge hearings last year, the independent consultants found that of all the entities that were partners in Big Stone II that really justified a need for more energy was Missouri River Energy Services,'' said Moore Friday afternoon.

"They in a sense are left holding the bag.''

Moore said Great River Energy, an original partner, backed out about three year ago.

"That caused a big flurry,'' he said. "Now we have Otter Tail backing out. What's left is small assemblage of small rural electric co-ops and municipals who I think may have been mislead by Otter Tail. I feel sorry for them because it's a lot of money that s been laid on the table that's never going to be made up.''

He hopes the partners will move toward the clean energy economy with wind, natural gas, efficiencies, solar and greater consumer awareness of judicial use of energy.

"We look at forming partnerships to solve the true problem,'' he said. "Missouri River Energy needs power. We know that. We want to work with them in creating that power in a different way -- in a way that will benefit their own cooperative members.''

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