When Xcel pulled out of biomass plant, small businesses left in lurch

BENSON, MINN. – In the fields outside this western Minnesota city is a conveyor belt to nowhere.

Twenty feet off the ground, it ends abruptly, dangling in midair where it used to connect to a giant power plant.

Dozens of Minnesota businesspeople say they've met the same fate as that conveyor belt — cut off and left dangling by the Legislature, which urged them to invest in a cutting-edge biomass energy operation here, then pulled the plug on the Fibrominn plant halfway through what was supposed to be a 22-year commitment.

Small businesses that had contracts to supply Fibrominn with wood, transportation and other services invested in trucks, industrial wood chippers and other heavy equipment, knowing that they had a guarantee of 22 years' worth of work from the plant, which burned turkey manure and wood chips to produce electricity for Xcel Energy.

But the Legislature allowed Xcel to buy its way out of the contract in 2017 after only 10 years. The city of Benson got $22 million to end the deal, and the plant was demolished and removed in 2019.

Meanwhile, the businesses that served the energy plant are facing losses that they say are in the tens of millions of dollars. Now they're hoping the Legislature will find some money to cover at least a portion of their losses. They're asking for $40 million, which is less than a third of the total $140 million investment their businesses made to serve the power plant and a mill that made fertilizer from the ashes left after burning.

"We were blindsided," said Randy Tersteeg, who processed more than 100,000 tons of fertilizer a year from the ashes. Tersteeg, who lives in Olivia, also invested in a fleet of trucks to haul manure 30 miles from the Jennie-O turkey plant in Willmar to Fibrominn, which consumed more than 100 truckloads a day, every day of the year.

Joe and Leslie Dukek run a logging business in Bemidji. They expanded their trucking fleet to handle the demands of supplying wood chips to the energy plant, as well as buying wood chippers that cost hundreds of thousands of dollars. After the plant closed, they sold a new $400,000 chipper for $180,000 and auctioned off five semi-tractors for far less than they paid.

"We find it frustrating that the government needed private industry's help, and then they had no consideration for us," said Steve Skallerud, owner of a trucking company in St. Joseph. Skallerud bought special trailers designed to haul turkey litter; they're not suited for other cargo, such as the granite his company also hauls from central Minnesota quarries. After the power plant closed, he had to lay off nearly half of his 50-person workforce.

Fibrominn was created because the Legislature wanted to encourage a move away from nuclear and fossil fuels, and toward alternative energy sources. The plant grew out of a deal between the Legislature and Northern States Power (NSP), Xcel's predecessor. In exchange for permission to expand radioactive waste storage at its Prairie Island nuclear plant near Red Wing, NSP agreed to buy a set amount of power generated from biomass sources, which are typically plant and animal products.

That led to the building of the Benson power plant, which opened in 2007. But even as the plant began operating, advances in wind and solar power were making those energy sources cheaper every year. Xcel realized that burning turkey manure and wood chips wasn't as cost-effective as other alternative methods of power generation.

In 2017, the Legislature allowed Xcel to buy its way out of the biomass contract for Benson, as well as for two smaller biomass facilities on the Iron Range. The power company said the move would save its customers hundreds of millions of dollars.

"As we lead the clean energy transition, we're adding renewables, delivering reliable electricity, and always looking for ways to save our customers money," Xcel said in a statement. "Buying out the expensive biomass contracts will result in customer savings of more than $600 million. We're also committed to working closely with our communities, customers and other stakeholders to effectively manage this transition."

The small businesses never saw it coming. They were steamrolled by Xcel's "army of lobbyists," said Scott Dane, executive director of the Associated Contract Loggers & Truckers of Minnesota. But he and others were able to persuade legislators in the next session that they should make good on some of the small-business investments made for the Fibrominn plant.

In 2018, a $40 million payment was included in an omnibus budget bill sent to Gov. Mark Dayton for his signature. But Dayton vetoed the bill for other reasons. When a revised budget bill made its way back to the governor's desk, the payment for Fibrominn investments wasn't included.

State Sen. Andrew Lang, R-Olivia, has been working to get payment for the Fibrominn vendors.

"There hasn't been any fairness," he said. "We got a significant amount of money for [the city of] Benson with the promise that we would get money the following year for the businesses that had made significant investments because they trusted the state."

Lang, who was then in his first term as a state senator, said he suffered from "a little bit of freshman naiveté" in not insisting on the money.

"I should have done it all the same year," he said.

By the following year, he said, "there were some senators and representatives that felt like all the debts had been paid."

Tersteeg said he's spoken with Gov. Tim Walz about the possible relief. While the governor has made no commitments, Tersteeg said, he's expressed sympathy for the businesses that served Fibrominn. For his part, Walz said he's willing to keep the topic on the table.

"Governor Walz appreciates the hardship these businesses have endured following the closure of the Benson biomass facility," said Teddy Tschann, a Walz spokesman. "The governor will continue to discuss this issue with the Minnesotans who have been impacted, as well as members of Legislature."

That's all the businesses can hope for, Tersteeg said.

"We realize the [biomass] program has changed," he said. "But we invested in what was your best idea at the time. We really bit the hook for those people.

"And now the same people are like, 'Just go away.' "

John Reinan • 612-673-7402