Green fuel or greenwashing?

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Kandiyohi Development’s proposal for a biomass plant in the Phillips neighborhood has many supporters – including the Minneapolis City Council, Planning Commission and Empowerment Zone office – but its opponents raise serious questions about the project’s viability and environmental impact.

Phillips, with almost 20,000 residents, is one of the oldest and largest neighborhoods in Minneapolis. Historically, Phillips also has been a place scarred with toxins left by the corporations that made the neighborhood their home. Its soil holds the city’s highest concentration of arsenic, the legacy of a former pesticide manufacturing site that stood uncapped for 30 years. Given that history, when a company announces plans to invest in the neighborhood and create well-paying jobs for residents by supplying environmentally-friendly energy to local businesses, it sounds like a dream come true.

History
Plans for electricity generation in Phillips began in 2001, when the Green Institute began talking about transformation of a garbage transfer station near Lake Street and Hiawatha Avenue into a 22.5 megawatt generator fueled by the incineration of biomass composed of urban tree waste and agricultural residue. According to Carl Nelson of the Green Institute, they focused on three goals: “One was having the lowest emissions, cleanest biomass source that we could. Two was having a community ownership, with benefits returning to the neighborhood. We had planned that to be through the Phillips Community Energy Cooperative. And to have it be a renewable energy project with positive environmental impact.”

After gaining the unanimous support of the Minneapolis City Council on March 22, 2002, they went to Washington to lobby Congressmember Martin Sabo and Senator Paul Wellstone. In 2003, they were awarded a $1.9 million Department of Energy grant to study the feasibility of the project. The Green Institute got to work laying the groundwork for the project—setting up an engineering study, soil sampling and a financial model. And then things started to fall apart.

The Green Institute, according to Carl Nelson, had begun to question the feasibility of the project, but continued research on it. Krause left the Green Institute in the spring of 2005 and founded Kandiyohi Development Partners, which was incorporated in August of that year. Allegiances at City Hall shifted. Instead of negotiating exclusively with the Green Institute, as they had been doing, the Transportation and Public Works Committee opened the project up to bidders in late 2005. Kandiyohi Development Partners was the only bidder.

By then, the project looked less attractive to the Green Institute. “We did the feasibility work and decided not to move forward with it,” says Carl Nelson, director of the Green Institute Community Energy Project. Nelson cited concerns over fuel availability and over whether utility companies would be willing to purchase the power generated by a plant as reasons for their decision. In the spring of 2006, the Green Institute sold its interest in the project—basically intellectual property rights in research that had been conducted—to Kandiyohi Development.

The $83 million generator proposed under the name of Midtown Eco Energy, is a project of Kandiyohi Development Partners. Michael Krause heads up Kandiyohi Development. Krause is a former director of the Green Institute, a local non-profit promoting sustainable energy use and green design. Supporters of the project say it will provide a new, cleaner energy source. While Krause claims community support for Midtown Eco Energy, a vocal opposition has recently surfaced.

Opponents of the project offer several different critiques, including an analysis pointing to lack of sufficient clean wood for fuel and economic unfeasibility, fears about air quality and the types of fuel that will be burned, and concerns about lack of community ownership of the project Interwoven with the various criticisms are concerns about credibility of claims made for the plant.

The Kandiyohi Development Plan

The Kandiyohi Development plans call for burning clean wood waste and woody plant residues to produce electricity and heat. The electricity would then be sold to a power company, which would re-sell it to consumers. The heat would be piped to businesses with a mile of the plant, possibly including the Abbott Hospital complex and the Midtown Exchange building, thereby reducing their dependence on fossil fuels.

Midtown Eco Energy’s website says the project is beneficial for many reasons: producing needed electricity; using clean, renewable fuel from trees and woody plants; reducing the impact of climate change by burning wood instead of coal or oil; and dramatically reducing emissions into the air.

The Minneapolis Community Planning and Economic Development committee has recommended that a $78 million Empowerment Zone bond be issued to the project, “one of the largest the city has ever issued,” according to Kandiyohi Development’s Kim Havey, who is also the Empowerment Zone’s former director. (According to the city of Minneapolis website, “The Empowerment Zone/Enterprise Community (EZ/EC) program … is designed to empower people and communities across the United States by inspiring Americans to work together to develop a strategic plan designed to create jobs and opportunities in our nation’s most impoverished urban and rural areas.”)

Midtown Eco Energy’s website also claims three city council votes in favor of the project, and says that the Minneapolis Planning Commission “also voted in unanimous support of the project in July 2007.” According to Planning Commission minutes, the vote was only on construction plans and zoning variances.

Where’s the wood?

Kandiyohi project director Kim Havey says that the wood supply is sustainable, and, furthermore, that the generator will lower pollution by reducing the amount of methane-emitting wood waste in landfills. The Midtown Eco-Energy website cites research conducted by Tim Goodman & Associates showing some 700,000 tons of waste wood generated in the Twin Cities annually.

The Green Institute’s Carl Nelson is skeptical, citing subsequent studies in 2004, 2005, 2006 and 2007, which suggest that “the fuel supply is really tight.”

“There’s definitely a lot of wood chips out there,” Nelson says, “but when you look at the other markets for woodchips—mulch, animal bedding, and things like that, there’s not that much left. You might be able to get fuel for the next year, but when you look 20 years out, it’s just too risky.” According to Nelson, the lack of reliable wood supply is a major reason that the Green Institute decided that the project was not feasible.

Anders Rydaker is the director of District Energy, the operator of a biomass facility that provides heating to buildings in downtown St. Paul. “We already use 300,000 tons of municipal wood waste a year,” he says. “There isn’t enough wood in the area to fuel both generators.”

David Morris, of the Institute for Local Self Reliance, concurs: “As I said at the time of the advisory meetings and continue to say, there is insufficient wood waste available to meet the needs of the existing and planned operations in the area based on the data I saw then, the data I’ve seen from District Energy and the data I’ve seen from being on the advisory committee of the Rock-Tenn group.”

Kandiyohi principal Craig Wilson responds that they “have finalized an agreement with a private wood supplier for 50 percent of our fuel supply. We also believe that the initial Green Institute study missed substantial quantities of wood from private landowners and smaller tree services.”

Air quality concerns
The air quality permit documents from the Minnesota Pollution Control Agency (MPCA) are confusing at best. The application permits the burning of “wood products such as plywood, particle board, strand board, and other types of products bound by glues and resins.” Other sections set rules for burning “experimental fuels,” but no definition of experimental fuels is given. Supplementary documents say that only urban wood waste will be burned.

Midtown Eco-Energy’s public presentation claims it will only be burning clean urban wood waste from trees and other woody plants. “We don’t plan on burning anything but tree waste,” Havey reassures. “But we could burn some clean construction waste if we wanted to in the future.”

Neighbors Against the Burner (NAB), a group originally formed to oppose refuse-derived fuel (RDF) burning at the Rock-Tenn plant in St. Paul, filed a petition for a contested hearing with the MPCA. Their petition states that there is no restriction on fuel types in the air quality permit.

Carol Overland, a utility regulatory attorney and former long-time East Phillips resident, says: “That project is not what it started out to be, not what they claim it is. Key — look for restrictions in the air permit, there are none that restrict use of garbage, and there is an opening to burn ‘experimental’ fuel, AND in Minnesota, thanks to Minn. Stat. 116.90, a biomass can burn up to 30% RDF.”

Rich Sandberg of MPCA says that the permit does restrict the kinds of fuel that can be burned. He points to a permit provision that says: “The Permittee shall only combust natural gas; clean wood residue and wood products (e.g. trees, tree stumps, tree limbs, bark, lumber, sawdust, sanderdust, chips, scraps, millings and shavings); and silvicultural materials, such as logging residues (slash) and orchard prunings.”

Craig Wilson of Kandiyohi Development agrees, saying that Kandiyohi Development has “gone on record publicly and repeatedly stating that Refuse-Derived Fuel (RDF) which is defined as municipal solid waste (to our understanding, what NAB refers to as garbage) will not be used as a fuel. Further, Midtown Eco Energy is not permitted to combust RDF.”

The experimental fuel provisions do allow for a limited-time testing of fuels not named in the permit. According to Sandberg, any experimental fuel would have to go through a complete permitting process after testing, in order to be authorized for regular (i.e. non-experimental) use.

Neighbors Against the Burner is also concerned about the emissions from even a wood-burning plant. NAB consultant Alan Muller, of Green Delaware, points out that the air quality permit would allow the plant to “put about ONE MILLION POUNDS of health-damaging air pollutants into the air every year via a 140 foot smokestack, including mercury, dioxin, arsenic, lead, ammonia, sulfuric acid, and formaldehyde.” The amounts listed in the permit are maximums, which might not be reached in operation of the plant. The MPCA considers these amounts within acceptable limits.

Muller has nothing good to say about any proposal to burn wood for energy. “Somehow we’ve been sold the idea that wood is a clean fuel,” he says. “It’s not. It produces a lot of fine particulates, at least equal to those of coal. The whole environmental regulation process hasn’t yet come to grips with these particles, and studies on their health effects have only begun in the last several years.”

Community ownership and support

In an August e-mail to a community member, Michael Krause claimed wide support for the project. “Our project won the unanimous support of the East Phillips neighborhood last month,” he wrote, “and also has written letters of support from David Morris at ILSR, Diana McKeown at Clean Water Action, and the Institute for Ag and Trade Policy.” The Midtown Eco Energy website says, “The project has support from adjacent neighborhoods as well as leading environmental organizations.”

On closer analysis, that support evaporates. The letters cited by Krause date back to 2004, and were written in support of the Green Institute-Phillips Community Energy Cooperative project.

Contacted in August, David Morris said he is not supportive of the project, and has not been in touch with Michael Krause for several years. Morris was on the advisory committee for the project in the beginning stages with the Green Institute, and he says that “a key to the project was that the Phillips Neighborhood would own the project, with equity as part of the DOE grant. Ownership is very important to ILSR. I think that after Michael took the project over to a private developer that that piece no longer exists.”

Diana McKeown of Clean Water Action says her group’s involvement was also in the early stages. “There were key components we supported,” she says. “One that was critical for us was local ownership and trying to give back to the community.” She says that Clean Water Action neither supports nor opposes the project today, and that she has asked Krause to stop listing them as supporters.

David Wallinga of the Institute for Agriculture and Trade Policy says that his organization has no position on the project, neither supporting nor opposing it.

Kandiyohi is also in the process of negotiating “good neighbor agreements” with six local community groups. The agreements promise to create seven jobs for neighborhood residents, out of a total of 20 permanent jobs.

What’s next?

While the project plans call for both sale of electricity and sale of heat generated by the plant, questions about market remain. Great River Energy says it has no plans to buy electricity from the project, and has ended negotiations with Kandiyohi Development. Xcel Energy says that Kandiyohi had made a proposal to them, but that they are not in negotiations at this time. Kandiyohi says it “will not be discussing confidential negotiations in the press.”

Another looming question is raised by a June decision by the Circuit Court for the District of Columbia invalidating some of the procedures used to approve permits. The impact of the federal court ruling is not clear, but John Sandberg of the MPCA says it is complicated and that the agency will need time to work through it.

Aside from the federal ruling, says Sandberg, the Kandiyohi Development permit application is still under review. The MPCA has to respond to comments submitted, consider the application for a contested case hearing, and decide whether there needs to be such a hearing or perhaps a director’s review of the application.

Construction was originally slated to begin this September. Earlier this year, the Minneapolis City Council voted to extend Kandiyohi Development’s option to purchase for another year, to March 2008, and to extend the closing date for sale of the property from October 2007 to October 2008.

Additional reporting by Mary Turck