Healy coal project in limbo

Posted: Tuesday, September 03, 2002

FAIRBANKS (AP) -- Golden Valley Electric Association and Alaska Industrial Development and Export Authority have parted ways again over the Healy Clean Coal project.

For a time the two were working together to seek a full overhaul of the experimental $297 million plant in Healy.

Now GVEA has plans to install two new power plants in North Pole, while AIDEA is seeking federal funds for a partial revision of the plant.

''We've got to start this thing up,'' said Bob Poe, AIDEA's executive director, whose last day on the job was last week. ''We all agreed it needed some corrections, but by and large, we thought it'd work well.''

But that view is hotly debated by GVEA officials, something they have maintained from the beginning. The experimental technology that cost millions in public money just didn't work. Dismantle the experiment and start over with a conventional coal plant, said Steve Haagenson, GVEA president.

''We believe we're protecting Interior Alaskans from poor decisions,'' Haagenson said, adding that they have not received assurances from AIDEA that the plant is safe, reliable, economical and will operate for the long term. Those points are crucial for GVEA, he said.

The project started with high hopes in the early 1990s. The Department of Energy offered a national competition for money to find new ways to burn coal in a ''clean'' way to mitigate the growing global problem of acid rain. AIDEA applied for $117.4 million from U.S. Department of Energy, and was one of 13 selected from a field of 48 applicants.

The Alaska Legislature supplied $25 million and AIDEA held an $85 million bond sale. The rest came from interest earnings and project participants.

Construction on the plant began in 1995 and was completed two years later. The plan was that AIDEA would build the plant and GVEA would take over operations after a final 90-day test that was held in 1999. That's when the trouble started.

After the 90-test period, GVEA said the technology didn't work the way it was supposed to and refused to take the plant. AIDEA disagreed. GVEA went to court and AIDEA countersued.

The two settled for a new plan that would protect GVEA's rate payers, while AIDEA would be paid back and GVEA could turn the plant into a traditional coal-burning operation.

Last year the two, along with Usibelli Coal Mine, which was to provide the coal for the plant, agreed to seek a low-interest federal loan for $125 million for the retrofit and refinancing of some of AIDEA's bonds.

This year Sen. Frank Murkowski added loan authority provisions into a national energy bill and GVEA asked the Department of Environmental Conservation for a revised air permit for the retrofit.

But the project got more bad news. The state Department of Environmental Conservation decided that GVEA would have to go through a more intensive revision process which included public hearings and comment periods. GVEA preferred a speedier process.

The energy bill wound up stuck in a Congressional conference committee. Sen. Ted Stevens recently announced more grim news, saying it would be difficult to get the money from Congress for the retrofit.

AIDEA is now planning a new near-$90 million, three-year test period and has asked for a $35 million grant under President Bush's $2 billion Clean Coal Power Initiative.

The authority plans to raise the additional $55 million from power sales during the three year test period.

''We believe we can prove the technology,'' he said. Last week the department notified AIDEA that they, along with 35 others, have made it through the first round of competition.

GVEA has been making plans of their own. Last week Haagenson told the Greater Fairbanks Chamber of Commerce that GVEA was expecting increased electricity demands from the National Missile Defense project at Fort Greely, the Pogo gold mine, and the possibility that Alyeska Pipeline Service Company will hook their trans-Alaska oil pipeline pump stations into GVEA's power grid.

The power cooperative is tentatively looking at adding two 40-megawatt power plants to its North Pole facilities, Haagenson said.

''Does that mean we're walking away from Healy Clean Coal? No,'' he said, but added the only acceptable terms GVEA would consider would be to turn the plant into a traditional one with the best, proven, technology available.

Poe scoffed at the idea.

''To throw away $297 million of public investment is unscrupulous,'' he said. Poe suggested that AIDEA could restart the plant and sell electricity directly to the National Missile Defense project, adding that they had the authority to do so.

AIDEA board member Larry Persily, deputy commissioner of the Department of Revenue, said that AIDEA can't let the plant sit idle without generating revenue. Currently AIDEA pays about $9 million a year on debt and for plant maintenance. The idea of AIDEA selling electricity on its own appeals to the board, Persily said.

''There is nothing stopping us,'' he said. ''We have a power generating plant that we believe will work well.''

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