Eco-friends become foes in biomass plant bidding war


More than a year after the city of Minneapolis began negotiating with the Green Institute to sell the Southside Transfer Station and build the city’s first biomass plant, there suddenly is another player with an interest in developing the site. And that competition is anything but friendly.

Michael Krause, who left his position as executive director of the Green Institute last summer, has created a development company of his own and last week convinced a key City Council committee to reconsider its decision to work out a deal with the Green Institute. Krause’s firm, Kandiyohi Partners, also includes the former head of the city’s Empowerment Zone, Kim Havey. Both men are familiar faces at City Hall (Krause is a member of the Planning Commission) and both have close personal ties to Community Development Committee chair Lisa Goodman.

Those connections were invaluable when Krause worked for the Green Institute, but now they appear to be steering some city officials away from the organization as a partner in the biomass project. The Transportation and Public Works Committee last week voted to halt the city’s negotiations with the Green Institute and issue a Request for Proposals in April that would open the project to more bidders.

Carl Nelson, director of the Green Institute’s Community Energy Project, was not happy with the decision. “The Green Institute has gotten screwed,” he said.

The organization does not oppose an open bidding process, Nelson said. “They should have done that from the beginning. The problem is changing the rules mid-stream.”

The Green Institute has invested some $110,000 on the biomass project already, money Nelson said was only spent because the city had given the organization the impression it was the only group in the running for the project. He hinted that the organization may ask to be reimbursed by the city.

For his part, Krause said his firm entered the fray because he felt his former employer was dragging its feet on the project. He said the $14 million in federal tax credits that make the project viable will expire if the biomass plant isn’t up and running by January of 2008. That means construction of the $70 million facility will have to begin by the end of 2006. While the Green Institute has been “stalling” the project, Krause said, Kandiyohi already has investors in place.

There’s no lack of irony–or bitterness–in the sudden turn of events, as even Nelson acknowledges that the Green Institute benefited from Krause’s “back-room politics” when the city essentially awarded the biomass project to them. He’s confident, though, that even Krause and Havey’s connections won’t prevent the city from seeing all the work the Green Institute has already invested in the project. “In the long run, we’re going to prevail,” he said.

Or maybe not. At least two council members last week hinted that the biomass facility may eventually be owned and operated by neither the Green Institute nor Kandiyohi, but by the city itself. “There are all kinds of options out there,” said Council Member Scott Benson. “I don’t want to limit this to selling the property to a specific party.”