End of contract spells uncertain future for Healy Clean Coal Project

Posted: Sunday, April 08, 2001

FAIRBANKS (AP) -- The Healy Clean Coal Project faced an uncertain future Saturday, when a one-year agreement between Golden Valley Electric Association and the Alaska Industrial Development and Export Authority expired.

The two entities and Usibelli Coal Mine, however, have agreed to work together at least three more months to determine the plan for the $267 million project.

The project was supposed to provide reliable electricity to the Interior, but has been plagued with legal and technical problems.

''The players are engaged in discussions on a continuous basis,'' AIDEA Executive Director Bob Poe told the Fairbanks Daily News-Miner.

Last March GVEA and AIDEA entered into the one-year agreement to settle lawsuits each had filed over the project. The plant is one of 40 funded by the U.S. Department of Energy Clean Coal Technology Program to develop cleaner methods of burning coal and to reduce acid rain.

The Department of Energy provided $117 million, and the state provided $25 million. AIDEA sold $85 million in bonds and planned to recover the expense under a power sales agreement with GVEA. Usibelli and GVEA also contributed.

Construction of the project's power plant was completed in 1997. But in 1998 GVEA filed suit in Superior Court saying AIDEA had not completed the plant on time. Later that same year GVEA backed out of a deal to lease the plant from AIDEA for $4 million a year, saying the technology didn't work as expected and that safety concerns had arisen because of an explosion at the plant.

Last year's agreement between the two entities seemed to cool the finger-pointing among all concerned. But disagreements remain.

Poe said he believes the power plant could be operational by the end of the year with partial retrofits. During 1997 testing the plant ran at 90 percent efficiency with clean emissions that meet federal levels, Poe said.

Mike Kelly, GVEA's Healy project manager, is less hopeful. A complete retrofit that would convert the power plant's combustor to a traditional one would be too expensive, he said. What's more, both sides disagree on how much partial retrofits would cost.

Kelly is reluctant to expose GVEA customers to the risk of higher monthly bills in case the partial retrofits prove too expensive.

''We're not saying it won't work,'' Kelly said. ''We're just saying there are risks. Let's work together.''

As of Saturday, however, AIDEA will reimburse GVEA an estimated $250,000 to $300,000 a month for salaries of 18 employees, maintenance and materials to maintain the power plant until August, Kelly said.

All sides hope to have decided by then what will be the best next step for the project.

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