Xcel backs away from power plant in Phillips

A proposal for a wood-burning power plant in south Minneapolis suffered what could be a mortal blow this week when Xcel Energy announced it was breaking off negotiations to buy the plant's electricity.

The plant developer said in a statement that it was "very surprised" because it thought Xcel was "partnering to finalize a signed agreement" in the past few weeks. The statement didn't address the proposal's future.

The Xcel decision is important because the developer has been given a June 9 deadline by the city to get a utility's commitment to buy the plant's power. That commitment is a requirement in a 2006 deal to sell the developer a piece of city land in the east Phillips neighborhood for the Midtown Eco Energy burner.

Xcel confirmed on Friday that it told Kandiyohi Development Partners earlier this week that it was ending the negotiations. Xcel said that the decision "was based on a number of factors including its assessment of ongoing system portfolio needs," but declined to elaborate.

Opponents were jubilant but some were wary. That's because Kandiyohi this week sought appointments with three City Council members, and opponents fear an attempt to extend the land sale deadlines. In an e-mail to the Star Tribune earlier this week, just after Xcel said it notified Kandiyohi of its decision, Kandiyohi reaffirmed its commitment to the project.

Jullonne Glad, an organizer among project opponents, said she expects Kandiyohi to seek a delay in city deadlines. "This is a milestone, but the pressure is definitely not off."

Kandiyohi portrays the plant as a cleaner-burning biomass alternative for generating power, using renewable fuels. Opponents argue that any additional pollution is too much in an area that already has concentrations of arsenic, lead and other pollutants. The Legislature recently ordered the Minnesota Pollution Control Agency, which is considering an air emissions permit for the plant, to consider the area's cumulative past and present pollution.

Kandiyohi's statement called Xcel's decision a "wake-up call to the state" about the difficulty in meeting renewable energy standards when such proposals "face subjective regulatory hurdles and are unable to be completed or are rejected because short-term political gains trump long-term environmental benefits."

David Morris, vice president of the Institute for Local Self-Reliance, predicted that Xcel's announcement means the project is dead. Kandiyohi's failure to get a power sales deal with Great River Energy, and now Xcel, leaves it without a feasible buyer for its electricity, said Morris, whose nonprofit promotes environmentally sound development.

Morris said Kandiyohi likely was seeking more from Xcel to cover its costs than other renewable energy projects seek.

"It's a significant blow to the project and opponents of the project can breathe a little easier," said area Council Member Gary Schiff, who opposes the burner.

Steve Brandt • 612-673-4438