By Dan Gearino
July 17, 2021 - In a town with fewer than 1,000 people, losing an employer tied to about 700 jobs is a kind of death, and that’s what Underwood, North Dakota, was facing until two weeks ago.
Great River Energy, the owner of the giant Coal Creek Station power plant south of the city, said last year that it was going to close the plant in 2022 following years of financial losses. Local and state leaders vowed to find a way to keep it open.
Now those leaders are celebrating. On June 30, after months of rumors, Rainbow Energy Marketing revealed that it had agreed to buy the plant, with plans to retrofit it using carbon capture systems and also help to develop a wind farm. The company, based in Bismarck, North Dakota, said the project might help to write a playbook for how to save other coal-fired power plants.
But what feels like a godsend to people in Underwood looks like a financial and environmental fiasco to energy analysts and clean energy advocates, who view the plan to use carbon capture technology to keep the plant running as an expensive distraction from the urgent need to embrace cleaner options to help address climate change. The differing views underscore the challenge of building a consensus on clean energy in a place where many people blame wind and solar power for killing coal jobs.
“For the people I deal with, it was sort of like a weight was lifted,” said Steve Cottingham of Underwood, chairman of the McLean County Board of Commissioners, about the announcement of the sale.
Coal Creek Station is the largest power plant in North Dakota, with capacity of about 1,150 megawatts. The plant has about 240 employees and the Falkirk Mine has about 450 employees. The mine, located a few miles from the plant, sells nearly all of its output to the plant.
Underwood is a city with no stop lights. An antique store is called The Coal Bin. The economy is built on agriculture and coal.
Mayor Leon Weisenburger Jr. said he estimates that about one-third of households have someone who works at, or is retired from, the plant or the mine. Many others commute from far away. Taxes from the plant and mine are an essential part of funding the city government and schools, he said.
“I can speak for the whole community when I say prayers were answered,” he said, about the sale.
In addition to their work in local government, Cottingham and Weisenburger are both coal workers, with Cottingham at the Falkirk Mine and Weisenburger making an hour-plus commute each way to his job at the larger Freedom Mine in Beulah. Both mines are owned by North American Coal of Texas.
The announcement of the plant’s closing was a blow to a state that relies heavily on fossil fuel industries for jobs and investment, from coal mines to the oil and gas fields of the Bakken Shale. North Dakota ranked eighth in the country in coal production in 2019, according to the Energy Information Administration.
Now the plant’s sale is cause for a victory lap for leaders like Gov. Doug Burgum, a Republican, whose office helped to arrange the deal. He said the announcement of the planned transfer is “a great day” and “a big win.”
The sale dovetails with Burgum’s goal, which he announced at an oil industry conference in May, of making the state carbon neutral by 2030, which means that all of the carbon dioxide released in the state would be removed or stored in some way. He has said that North Dakota can expand fossil fuel jobs by being at the forefront of using carbon capture, a process that involves separating carbon from the exhaust that otherwise would be released into the atmosphere and then finding a way to use or store the carbon.
“The only way we’ll achieve this goal is through innovation,” Burgum said.
‘They’re Not Really Being Honest’
One of the people not celebrating the news about the coal plant is Scott Skokos, executive director of Dakota Resource Council, an environmental advocacy group based in Bismarck, an hour’s drive south of Underwood.
The plan to save the plant is “kind of bonkers,” he said.
Skokos listed the reasons: Rainbow Energy is an energy trading company with no experience in running a power plant; carbon capture has never been deployed on a commercial scale as part of a coal plant retrofit; attempts at using carbon capture in other settings have almost all been doomed by high costs and mechanical problems; and the Coal Creek plant was a money-loser even before adding expensive new systems.
To make it work, the plant would need a massive infusion of federal and state subsidies, including from the federal 45Q carbon capture tax credit.
Considering all of those factors, Skokos thinks the plan to save the plant is really about delaying its closing for a few years, so that elected officials can get the short-term benefit of saying they saved the jobs and then, when the plant closes, those officials can say they did everything they could to save it.
“They’re not really being honest with these workers,” he said, because if the subsidies don’t come through or if the carbon capture system doesn’t work, “then you’re at the same place you were.”
The idea of using carbon capture to make an old coal plant financially viable is a near impossibility, said Karl Rábago, who runs an energy consulting firm and is a former member of the Public Utility Commission of Texas. utilities commission. He doubts that the plan would be able to get financing from the kinds of firms that typically would be involved in large electricity sector projects.
He said investors may see an opportunity to benefit from tax credits and other aid programs tied to carbon capture, but that there are plenty of other options that would provide more reliable returns and not involve the social blowback of investing in coal.
“There are an almost endless list of lower-cost ways to get that much energy value with no carbon,” Rábago said.
An Opportunity for Wind Energy
At first glance, the situation with Coal Creek may look like a familiar example of fossil fuel industries sparring with environmental advocates. But some people in North Dakota who support renewable energy say the plan is a good thing, while realizing that this may sound crazy to outsiders.
“This is a clean energy win whether you like it or not,” said Kevin Pranis, who works in the Laborers’ International Union of North America office that oversees Minnesota and North Dakota.
The union has members who do maintenance on coal plants, including Coal Creek, and other members who install wind turbines.
The state has the potential for substantial job growth in wind energy, but the view that wind farms are killing the coal industry has led to a backlash, Pranis said. Many people in North Dakota now see wind energy as the enemy, which inspired local actions like a moratorium on new wind farms in McLean County. This makes it difficult for the state to rapidly add to its 4,300 megawatts of wind farms, which ranks ninth in the country, right behind Minnesota.
The moratorium led Great River to scrap plans to develop 800 megawatts of wind projects in the area. The company ended up getting the wind energy it wanted by investing in four wind farms in Minnesota, instead.
Pranis sees the Coal Creek sale as an opportunity to reinvigorate the wind industry in the state. One factor is that Rainbow Energy has said it wants to work with wind energy companies to develop resources to provide electricity for the carbon capture system at the coal plant. To do that, McLean County would need to lift its moratorium, which might allow for development of other wind farms in the area.
Also, Pranis thinks the idea of trying to use carbon capture at the plant is a worthy one that could help with the long-term goal of improving carbon capture technology for a variety of uses, like in the steel and cement industries.
He notes that wind and solar power are affordable today in large part as a result of tax credits and government programs that encouraged development. He thinks carbon capture deserves a similar opportunity to improve its technology and reduce costs.
But the main reason he likes the plan is it would preserve jobs and, he hopes, reduce the desire to blame clean energy industries for job losses. He sees great harm in the view that some environmental groups were cheering the plant’s closing last year.
“It’s not just the number of jobs,” he said. “These are the high-quality jobs that provide health care, that provide retirement benefits, that provide middle-class household incomes. Those incomes are what supports everything else in the area.”
In North Dakota, the average weekly pay at fossil fuel power plants was $2,362 per week, one of the dozen most lucrative job categories in the state, according to the most recent quarterly census from the Bureau of Labor Statistics. Coal mining jobs in the state pay about the same, with $2,376 per week.
Those wages are more than double than the state average for all industries.
But there aren’t many of those jobs in North Dakota, with about 1,000 jobs in power plants and about 1,200 in coal mines, including underground mines along with surface mines like the one in McClean County.
While wind energy is growing in North Dakota, it has few permanent jobs. The Bureau of Labor Statistics doesn’t list the number of people who work in wind power generation in the state, which often means the number is small or involves only a few employers. The laborers’ union has said the wind industry hurts itself politically by relying on construction workers from other states as opposed to hiring more local workers to build wind farms.
The small number of local workers shows some of the benefits and drawbacks of wind energy: Wind farms require few people to operate and maintain, which helps to drive down costs, but then there are fewer residents with a stake in the industry compared to coal, which requires many more people.
A wind energy business group, North Dakotans for Comprehensive Energy Solutions, supports the Coal Creek plan for many of the same reasons that the union does. Tammy Ibach, the organization’s director, said people in various energy industries should be able to work together for the common good.
But the idea that the plant sale is a win for clean energy quickly fades when viewed by people who do not live in North Dakota or represent workers there.
The plan is “sadly misguided,” said Joe Smyth, research manager for the Energy and Policy Institute, a watchdog group that does research on energy companies.
He said the idea of a retrofit of the plant is part of a broader trend to look to income from carbon capture subsidies as a way to prolong the lives of old power plants. Another example is San Juan Generating Station in New Mexico, where Enchant Energy is trying to raise more than $1 billion to install a carbon capture system.
The plan in New Mexico, announced by Enchant in 2019, has faced delays because of technical and funding challenges, to the point that the company is now saying it will begin carbon capture no earlier than 2024.
‘Looking to Take Coal to the Next Level’
Much of what drives the sale of Coal Creek is a desire by leaders to retain jobs. But there remains the problem that the plant was losing money and now is looking at an expensive and complicated retrofit.
Despite those challenges, the people behind Rainbow Energy are talking about extending the plant’s life by decades. A recent headline in the Central McLean News-Journal said, “Another 40 Years.”
It was referring to a quote from Stacy Tschider, the president of Rainbow Energy, who was referring to the plant’s legacy dating back to 1981 and said, “It’s up to me to continue that for another 40 years.”
Rainbow Energy, whose leaders declined to be interviewed for this story and did not respond to emailed questions, is a subsidiary of United Energy Corp., also based in Bismarck. United Energy Corp.’s companies are mainly in the oil and gas industry, along with some that work with clients to buy and sell electricity.
Rainbow Energy would set up an affiliate company, Rainbow Energy Center, that would own and operate the plant, and a second affiliate, Nexus Line LLC, would become owner of the transmission line that delivers electricity from the plant to customers in Minnesota.
The sale would close later this year, pending regulatory approvals. The terms of the sale were not disclosed, but the chief executive of the seller, Great River Energy, has said before that he would be willing to transfer the plant almost for free if there were a willing buyer. The transmission line is a more valuable asset in a part of the country that doesn’t have enough grid connections.
Tschider told local reporters that the installation of a carbon capture system would take up to five years and cost an estimated $1.5 billion, and that support from federal policies would be an essential part of making it happen, according to reporting by Amy Sisk of The Bismarck Tribune, who has closely covered the announcement of the plant’s closing and now the sale.
“I’m looking to take coal to the next level,” Tschider said.
Beyond general comments about how tax credits are essential to Rainbow’s plan, the company has provided few details about how it intends to make the plant profitable.
Doing Something that Hasn’t Been Done
Coal Creek Station had become an economic sinkhole for Great River because the costs of generating electricity there were much higher than the equivalent costs on the regional market. The low price of natural gas along with low prices of wind power had helped to drive down wholesale electricity prices to the point that coal couldn’t compete.
Great River, based near Minneapolis, generates and delivers electricity to a group of rural cooperative utilities that serve about 700,000 customers, mainly in Minnesota.
David Saggau, Great River’s president and CEO, last year told the Lignite Energy Council, a coal industry group, that the plant had lost $170 million in 2019 because its average electricity cost was nearly double the average that buyers could get on the market. He shared a slide showing the plant’s electricity had been more expensive than the market every year since 2008.
“Looking forward, we don’t see market conditions improving to a point where we could keep the plant operational,” he said.
Great River had said the plant’s closing was part of a long-term plan to reduce emissions and rely more on renewable energy, which is a priority for some of the utilities it sells to.
But the company is changing those plans by selling to Rainbow Energy, an agreement that says Great River will continue to buy electricity from the plant for up to 10 years. The contract says Great River will use 1,050 megawatts—nearly all of the plant’s generating capacity—for two years, and then use 300 megawatts for eight years, according to a Great River spokesman.
“Purchasing power from Rainbow was not in our original plan, but it will serve as a reliable steppingstone in our power supply transition,” Saggau said in the news release about the sale.
Great River’s role in the sale is troubling to the Sierra Club’s Minnesota office, which says this deal makes little sense for Great River and for its customers.
“This smells like a backroom deal that benefits the North Dakota coal lobby, not regular Minnesotans,” Margaret Levin, the Sierra Club’s local chapter director in Minnesota, said in a statement.
Pranis of the laborers’ union said Great River and Rainbow deserve praise for making this deal, but added that all involved realize that there is a high degree of difficulty going forward.
“I don’t think any of us know what’s going to work,” he said. “I think the new owners are aware that there are real challenges and they’re trying to do something that really hasn’t been done.”