Excelsior Energy won’t have to make further payments on $9.5 million in state loans for an Iron Range power plant that never got off the ground.
Excelsior Energy, the Minneapolis-based company that never delivered on its promise to produce electricity with clean-coal technology, is getting government help to clean up its debts.
A development agency for the Iron Range, where the company’s ill-fated coal-gasification project was to be located, on Monday approved the outline of a deal that will allow the company to skip further payments on $9.5 million in state loans dating back to 2002.
The Mesaba Energy Project, which was to have been built by 2011, never got off the ground as the recession cut electrical demand, no utility wanted the power and the fracking boom cut the price of natural gas, leaving clean-coal projects unable to compete.
“We don’t have unlimited resources,” said Excelsior CEO Tom Micheletti in an interview Monday.
The company has made three annual $100,000 payments since 2010 on the two loans from the Iron Range Resources and Rehabilitation Board (IRRRB), a state development agency funded by taconite industry taxes.
On Monday, the board authorized IRRRB Commissioner Tony Sertich to renegotiate the debt terms, giving the company until the end of 2019 to develop the project or the development agency will take it over. The company still would get 25 percent of the proceeds if the agency found a buyer for the project after that — a condition that two board members questioned.
“I have never heard of anyone getting 25 percent back on a repossessed house or a repossessed business,” said Rep. David Dill, DFL-Crane Lake.
Excelsior has said it would consider developing a natural gas-fired power plant at its site north of Taconite, Minn. But the company didn’t join the competitive bidding to build such a plant for Xcel Energy, the state’s largest power company.
Micheletti said he didn’t have faith in the bidding process, and the deadline has passed. He said the company still hopes some version of the Mesaba Energy Project eventually will be built, possibly even a power plant that burns biomass such as wood.
The company in December acquired 240 acres of land and options for adjacent property where any power plant would be built.
The two IRRRB loans represented nearly a quarter of the more than $40 million Excelsior spent trying to develop the plant that would convert coal to gas and burn it to generate power. Most of the engineering, environmental review and other work was funded by a $22 million U.S. Energy Department clean-coal grant and a $10 million grant that the state Legislature ordered Xcel to pay out of its Renewable Development Fund, whose money comes from ratepayers. Excelsior was not obligated to repay the grants if the project failed.
In 2008, the state Legislative Auditor faulted Excelsior and the IRRRB for allowing the company to spend some of the borrowed state money on lobbying for the project.
The IRRRB endorsed the proposed loan restructuring, but with a limit on the payback feature, although board member Tom Anzelc, who has long opposed the project, still objected. Sertich has sole authority to renegotiate the loans.
Charlotte Neigh, who co-chaired an opposition group called Citizens Against the Mesaba Project, criticized the action, saying the IRRRB should have taken legal steps when Excelsior defaulted on its loans.
“This is not logical. This is not rational,” she said. “They don’t want to admit that they really screwed it up, and now it is hard to deny.”
David Shaffer • 612-673-7090 Twitter: @ShafferStrib