Loggers and truckers sue Xcel Energy over proposed shutdowns of plants

A group of loggers in Minnesota is using an environmental law to sue Xcel Energy about three biomass plants in the state that burn wood waste or turkey manure to produce electricity.

The Associated Contract Loggers & Truckers of Minnesota filed the lawsuit last week in state court to stop Xcel from buying and shutting down one plant and ending contracts with two others. The move, the group said, would eliminate 100 direct jobs and hundreds of indirect jobs.

"In addition to devastating many hardworking families and businesses across greater Minnesota who depend on these facilities, Xcel's plan would also be terrible for the environment," said Scott Dane, the association's executive director.

Xcel said electricity from the plants is far too expensive, and contracts should be ended to save ratepayers money.

But Clean Energy Economy Minnesota, a nonprofit group that works with clean-energy companies across the state and is not part of the lawsuit, said that the three plants are critically important markets for biomass and represent millions of dollars in capital investments.

"Any decision that is made prior to understanding the full economic impact this would have on forest management, supply chain participants and local communities, in particular, would be shortsighted," said Executive Director Gregg Mast.

The turkey manure incinerator is located in Benson in western Minnesota, and the two wood-burning plants are in Virginia and Hibbing, owned by the Laurentian Energy Authority.

Xcel signed long-term contracts to purchase electricity from Laurentian and Benson until 2026 and 2028, respectively.

The biomass commitments were spawned by a multipronged 1994 agreement that Xcel's predecessor Northern States Power Co. made with the state. In exchange for permission to expand nuclear waste storage at the utility's Prairie Island nuclear plant in Red Wing, NSP promised to generate or purchase a certain amount of its future power from wind and biomass plants.

Investors built the Benson plant to burn turkey manure and wood waste in 2007, and Laurentian converted two Iron Range municipal plants to burn wood instead of coal. The logging association estimates that Laurentian buys $7 million and the Benson plant purchases $20 million in wood chips each year.

Xcel made the case to the 2017 Legislature that the biomass plants are the most expensive energy on the utility's system, and cost 10 times more than wind-generated power. It has also claimed that removing biomass energy could save its customers nearly $700 million over the next 11 years.

Lawmakers responded by passing a law that allows Xcel to buy out the contracts if the plant owners, cities and the Public Utilities Commission (PUC) agree to the details. Under those provisions, Xcel may purchase and shut down the Benson plant and get out early from its power purchase agreements with the plants in Hibbing and Virginia.

Xcel petitioned the PUC in June and July to approve those plans, but the commission has yet to make any decisions.

The loggers' lawsuit contends that shutting down the power plants will damage the health of Minnesota's forests. Harvesting the fuel utilizes thousands of acres of blown down, damaged and low-grade wood that is otherwise useless and would be left uncollected in the forests, the lawsuit said.

The result would be increased forest-fire hazards, negative effects on private and public timber management, and interference with projects to halt invasive species.

Those points were also made separately in comment letters filed with the PUC in September. The Superior National Forest said it has "grave concerns" about the economic and environmental effects of ending the biomass contracts, and the Minnesota DNR said the commission "lacks sufficient information" to make a decision and needs a "robust analysis" to proceed.

The loggers' lawsuit asks the court to appoint a task force to assess the environmental impacts of ending biomass energy production at the three plants, and an injunction to prevent shutdowns or cancellations of the existing power purchase agreements.

Shutting down the Benson plant in the next few months also would disrupt manure management plans and be a big problem for many turkey producers, said Steve Olson, executive director of the Minnesota Turkey Growers Association.

"Basically we'd like to have three to five years to be able to identify where this turkey litter can go," said Olson, whose organization is not part of the lawsuit. "This thing came up all of a sudden and started being discussed late in the legislative session, so it hasn't given us a whole lot of time to react."

Olson said some producers are looking at options for spreading the manure on land, but others are more constrained and may need to haul it long distances or build storage areas on their farms, both of which are expensive.

Xcel officials said they have no comment on the lawsuit, but have been working closely with suppliers and stakeholders on the future of the biomass contracts.

"The energy generated from these facilities is far more expensive compared to other energy resources, and we want to replace it with something more affordable for our customers," the utility said in a statement. "We recognize a plant closure impacts employees, suppliers and the community, and we are working with them through this transition."

Part of that involves compensation for the cities affected if the biomass plants shut down. The law authorizes payment of $20 million in four installments to the city of Benson between fiscal 2018 and 2021 for economic development, and $34 million over five years to Virginia and Hibbing through Laurentian "to assist the transition required by the new, amended or terminated power purchase agreement."

That also has been controversial with environmental leaders and others, since the law allows the $54 million to come from a special renewable energy development fund that was designated for clean energy research and projects.

The funding provision also bothered Gov. Mark Dayton, who signed the law as part of the omnibus jobs and energy bill, but objected in his signature letter to its negative effects on the timber industry and to using significant amounts of the fund "for nonrenewable energy uses" over the next several years.

Tom Meersman • 612-673-7388