Carbon-trading plan moves power project forward: Green groups call deal a state sellout

Sep 1 - McClatchy-Tribune Regional News - Leslie Brooks Suzukamo Pioneer Press, St. Paul, Minn.

Seven regional utilities that propose building a controversial $1.6 billion coal-fired power plant on the South Dakota border have agreed to offset the carbon-dioxide emissions of the plant's Minnesota customers.

The utilities and state regulators called the agreement groundbreaking because it would be the first time operators of a U.S. power project have agreed to limits on heat-trapping carbon dioxide, the key greenhouse gas blamed for global warming. But environmental groups on Friday called it a step backward.

The settlement between the utilities and the Minnesota Department of Commerce was revealed Friday. The proposed power plant, known as Big Stone II, would be built near Big Stone City, S.D., near the Minnesota border, and would supply power to seven utilities, including Otter Tail Power in Fergus Falls, Minn., and Great River Energy in Elk River, Minn.

The 630-megawatt plant, which is scheduled to begin operations in 2012, would serve 2.3 million people, most of them in Minnesota, with the remainder in the Dakotas, Iowa, eastern Montana and Wisconsin. Minnesota customers are expected to consume about half the power the plant produces, so the agreement with the state makes the utilities responsible for offsetting about half the 4.7 million tons of carbon that Big Stone II is expected to produce annually.

Under the agreement, the seven utilities would be allowed to choose their own methods to offset the carbon, said Dan Sharp, Big Stone II's spokesman.

Those methods, some of which are still in the developmental stage, could range from burying carbon-dioxide emissions deep underground to buying carbon credits valued at $10-a-ton on a trading exchange. The exchanges could use the money to fund environmentally friendly projects such as tree planting to offset or neutralize the effects of utility greenhouse gases.

The utilities also agreed to build or buy at least 180 megawatts of clean energy produced by wind farms owned by local communities or cooperatives, to improve their conservation efforts and to reduce mercury emissions from the plant.

"It's aggressive and it is the first plan in the country to deal with carbon," said Edward Garvey, the state's Deputy Commerce Commissioner in charge of energy and telecommunications. "The key thing is they actually (reduce carbon emissions) and they do it in a way that is quantifiable, verifiable and permanent."

But environmental groups that have opposed the project dismissed the agreement on Friday as "empty-handed" and a step backwards from Gov. Tim Pawlenty's pledge to reduce fossil fuel use in Minnesota. The governor signed a bill this spring pushing utilities to reduce greenhouse-gas emissions by 15 percent by 2015 and 80 percent by 2050.

"This is a tremendous setback for Minnesotans and clean air," Scott Elkins, state director of the Sierra Club, said in a statement Friday. He accused Pawlenty of "accelerating global warming" with the proposal.

"So far the Commerce Department has come up empty-handed with this settlement," said Beth Goodpaster, the lead attorney for the environmental groups.

Goodpaster, an attorney with the St. Paul-based nonprofit Minnesota Center for Environmental Advocacy, said the agreement to offset carbon dioxide produced by the plant is meaningless. The utilities could charge themselves $10 for every ton of CO2 produced and pass along the cost to ratepayers without paying for an offsetting project, she said.

Buying energy from community-based wind farms may be a good thing, she said, "but it doesn't make Big Stone II a better thing." she added.

The next move belongs to the Minnesota Public Utilities Commission. The utilities in October are expected to appear before the PUC to ask for permission to build or upgrade two high-voltage transmission lines in western Minnesota that would deliver about half of the capacity of Big Stone II to Minnesota consumers.

The environmentalists believe the PUC should reject permission for the transmission lines because analysis shows Big Stone II isn't cost-efficient.

South Dakota already has approved the site plans for the plant.

Leslie Brooks Suzukamo covers telecommunications, technology and energy and can be reached at lsuzukamo@pioneerpress.com or 651-228-5475.