A plan to sell, rather than close, the largest coal-fired power plant in North Dakota is nearly final. The completion of the sale would allow the buyer to move on to the much greater challenge of making the plant financially viable and installing a carbon capture system.

Great River Energy of Minnesota originally planned to close the plant, Coal Creek Station, after years of financial losses, but the company changed course and decided to sell the plant after intense pressure from elected officials in North Dakota. State officials have been zealous in trying to preserve coal jobs, to the point that they helped to arrange the sale and hope to use government subsidies to help retrofit the plant with a carbon capture system.

The efforts by officials to keep the plant open is part of a larger pattern of state and local governments, from Montana to West Virginia, downplaying concerns about the high costs and emissions from burning coal and working to secure a future for coal mines and coal-fired power plants. In some of those places, the coal industry and government leaders are embracing carbon capture, despite warnings from energy analysts that this a costly investment that is unlikely to be successful at substantially cutting emissions.

The last major step for the Coal Creek sale will be a vote in early February by boards of directors of rural cooperative utilities across Minnesota on whether to approve a revised sales contract between Great River and the buyer, Rainbow Energy Marketing of North Dakota. The revised contract includes a provision to allow delivery of wind energy from North Dakota to Minnesota and a small increase in Great River’s financial commitment to continue to buy coal power from the plant.

Minnesota environmental advocates have opposed the sale every step of the way.

“We need somebody to be held accountable,” said Veda Kanitz, an environmental advocate who also is a customer of one of the co-ops, Dakota Electric Association, that receives power from the plant. “We’re not seeing a true risk-benefit analysis. And I don’t think they’re properly factoring in the climate impacts.”

Kanitz and other opponents are upset that Great River has agreed to buy electricity from the plant as a condition of the sale, which she thinks is not in the best interests of customers. The revised sale agreement says Great River will pay to receive 1,050 megawatts—nearly all of the plant’s generating capacity—until the end of 2022, and then receive up to 350 megawatts from the plant for eight years after that.

Great River executives say they are trying to balance the need to reduce emissions with an effort to retain jobs at the plant and the adjacent coal mine in North Dakota.

“We understand the economic impact and the social impact of what a closure event would be, and what that would mean for the communities and the people out there,” said Zac Ruzycki, Great River’s director of resource planning.

The New Sale Agreement

Great River, based outside of Minneapolis, manages the supply of electricity to 28 rural electric cooperatives that serve about 700,000 customers. The company is asking its member co-ops to approve the revised contract with Rainbow Energy.

One of the reasons for the new contract is that the previous agreement, which the co-ops voted to approve in July, expired because the sale had not been completed by Dec. 31, 2021. (Connexus Energy, the largest of Great River’s co-ops, was the only member to vote against the sale, citing financial and environmental concerns.)

The main reason for the delay was that the plant sale also includes the sale of the 436-mile interstate power line that connects the plant to the Minneapolis-St. Paul metro area, and the line sale needed to be approved by the Public Utilities Commission of Minnesota. Rather than issue a quick approval, the commission delayed the decision and asked for additional information from Rainbow Energy in response to concerns raised by opponents of the sale, who questioned whether Rainbow was qualified to own the line.

This is the same power line which the construction of in the 1970s led to a years-long uprising by Minnesota farmers who didn’t want the line to run through their communities.

On Jan. 6, the commission voted to approve the transfer, saying that Rainbow had shown it was qualified to cover costs related to owning the line.

The upshot is that the supporters of the sale have now cleared every major obstacle except for the co-ops’ vote on the new contract, which is taking place in February, with many co-ops voting on Feb. 9.

The new contract contains some differences from the previous version. In addition to setting the terms of the sale of the plant and the power line, the new contract says that Rainbow Energy will allow Great River to use the power line to deliver 400 megawatts of wind power to be developed near the plant. The wind power will have priority on the line, even if that sometimes means displacing coal power.

Ruzycki of Great River said his company had wanted to include a provision about wind power in the original sale contract, but couldn’t come to an agreement with Rainbow. The parties continued to discuss this and were able to agree as they worked on the revised contract.

Great River has been in discussions with a developer that would build the wind farm. Ruzycki declined to provide additional details, but said more information will be available as soon as in the next few days.

Another change with the new contract is that Great River is agreeing to buy up to 350 megawatts of the coal plant’s capacity for eight years, starting in 2023, a change from the previous contract, which called for Great River to buy 300 megawatts during this period.

Ruzycki said Great River agreed to this because the company was responding to the concerns of some member co-ops about having access to enough electricity sources that were available around the clock.

Great River’s commitment to buy power from Coal Creek includes conditions that require Rainbow to work toward installing a carbon capture system and eventually successfully deploy the system.

Rainbow Energy is a subsidiary of United Energy Corp. of North Dakota, a business that is mainly active in the oil and gas industry. Executives of the company declined to be interviewed.

But Rainbow said in a news release that it expects to close the sale no earlier than May 1 and then would begin work on the multi-year process of designing and installing a carbon capture system.

Opposition to Wind Energy May Be Thawing

The addition of wind power to the sale agreement is significant because it follows a period when local officials near the plant were hostile to wind energy because they viewed it as competition for coal.

Great River announced in May 2020 that it was planning to close Coal Creek and would replace some of the electricity by developing wind farms in the same part of North Dakota, with the electricity to be delivered on the power line that serves the coal plant.

In response, local leaders in McClean County, where the plant is located, placed a moratorium on new wind farms, which would mean the power line would have no power to deliver once the coal plant closed.

The moratorium, along with the involvement of North Dakota state leaders, helped to push Great River to focus instead on finding a buyer for the plant and the line. In March 2021, North Dakota Gov. Doug Burgum, a Republican, announced that Great River had entered exclusive negotiations with a prospective buyer of the plant, which he hailed as “wonderful news.”

His office and the office of Lt. Gov. Brent Sanford had been deeply involved in the process, with several years of public statements and behind-the-scenes organizing to put Great River and Rainbow together and help them come to an agreement.

McClean County leaders have said they would be willing to lift the wind energy moratorium, as long as any development takes place alongside a plan to keep Coal Creek open. The officials say they are mainly concerned with preserving the roughly 700 jobs that are tied to the plant and the mine.

This turn of events is infuriating for environmental advocates, who say the best course of action would be to close the plant and focus exclusively on developing renewable energy. But the leaders of unions like Laborers’ International Union of North America say the proposed sale is the best possible outcome.

Kevin Pranis, an official with the union, said that closing the plant was fueling the idea that renewable energy was a job-killer and ran the risk of setting back renewable energy development in North Dakota for years. The union has members that do maintenance at power plants, including Coal Creek, and at wind farms.

As he sees it, Rainbow Energy deserves a chance to see if it can make carbon capture work at Coal Creek.

“I think we’re moving forward, finally,” he said.

State Leaders Working to Preserve Coal

North Dakota is one of several states in which leaders have been aggressive in trying to preserve jobs in the coal industry, even though there are alternatives that are less expensive and produce lower emissions.

Officials in Montana, West Virginia and Wyoming, among others, have taken steps to slow the closing of coal plants, using state laws or regulatory actions. One example is the ongoing legal battle in Montana over Colstrip Power Plant, with a capacity of about 1,500 megawatts. A group of Oregon and Washington utilities that are majority owners of the plant want to close it, citing financial and environmental concerns. The Montana Legislature passed a law in 2021 that changed the plant’s ownership agreement in ways that impeded the closing and favored the minority owners that wanted to keep it open. The law is now being challenged in court.

In almost all cases, the costs of continuing to operate old coal plants are being passed on to utility ratepayers.

“The problem is our government is captive,” said Scott Skokos, executive director of Dakota Resource Council, an environmental advocacy group based in Bismarck.

He means that fossil fuel industries exert a strong enough influence on government that officials are often acting as advocates for the industries, and are not thinking enough about the long-term public good.

‘These Are Not Good Projects’

For people who follow attempts to develop carbon capture technology, the idea of retrofitting Coal Creek with carbon capture makes little sense: Its costs will easily exceed $1 billion and the project will have a low chance of capturing much carbon dioxide.

“The track record is not great on the technology,” said Eric Gimon, a senior fellow at the think tank Energy Innovation.

The U.S. Government Accountability Office listed some of the challenges in a report issued in December saying that government incentives for carbon capture have led to projects that have almost all failed.

But that doesn’t mean Rainbow is going to lose money on the deal. The government provides tax incentives for carbon capture based on the tonnage of carbon that is buried or repurposed. If it is passed, the Build Back Better legislation currently stalled in Congress might change the terms of those incentives to increase the payments.

This creates the possibility that projects like the one envisioned at Coal Creek could generate hundreds of millions of dollars per year in incentives for the owners, which might make the plant financially viable.

Also, Rainbow can make money with the interstate power line, a valuable asset for delivering electricity to Minnesota at a time when the grid doesn’t have enough interstate lines.

But focusing on whether the plant’s owners will make money is missing the larger point, Gimon said. At a time when the United States needs to drastically cut carbon dioxide emissions, he doesn’t think it makes sense to spend sizable sums of money to extend the lives of old coal plants.

“No, these are not good projects,” he said.