Minnesota regulators OK Big Stone retrofit

The first in what could be a wave of costly environmental upgrades to large, coal-fired power plants won approval Tuesday from Minnesota utility regulators.

Otter Tail Power Co. of Fergus Falls, Minn., says it needs a $489 million retrofit of the 36-year-old Big Stone power plant in Milbank, S.D., to comply with regulations to limit air pollutants that cause haze in the Boundary Waters Canoe Area Wilderness.

Environmental groups had argued that extending the power plant's life would be a costly mistake because of rising coal prices and likely future regulation of greenhouse gases, but the Minnesota Public Utilities Commission voted 5-0 to endorse the retrofit as "prudent."

"We're deciding whether the Big Stone plant is going to run for many, many decades to come," commission Chairwoman Ellen Anderson said moments before the vote.

State regulators hit the pause button on the utility's separate plans to upgrade its smaller, two-unit Hoot Lake coal power plant near Fergus Falls at a cost of up to $250 million. Instead, the commission ordered the utility to study whether it makes sense to keep or retire the units, which began generating in 1959 and 1964. The report is due in nine months.

The retrofit of the Big Stone plant would reduce haze-forming pollutants by 80 to 90 percent, bringing it into compliance with federal regulations designed to protect wilderness areas and national parks, including the BWCA and Voyageurs National Park in Minnesota.

Across the U.S., utilities and regulators are facing similar decisions on expensive upgrades to coal-burning power plants. Besides the haze rule, coal plants face regulations for mercury emissions expected to be released Wednesday and rules for smog-related pollutants that cross state lines that take effect Jan. 1. Other coming rules could affect cooling water, coal ash and CO2 emissions.

Utilities and regulators will face tougher choices with mid-sized coal power plants, including the Hoot Lake units. The Minnesota Commerce Department, which analyzes utility rates, has questioned whether upgrading some of these plants is worth the expense.

Otter Tail Power, which owns 54 percent of the Big Stone plant, is a publicly traded utility that brought in $1.1 billion in revenue last year. It serves 129,000 customers in Minnesota, North Dakota and South Dakota. Two other utilities own parts of Big Stone.

"It is important that we do this," Cris Kling, a spokeswoman for Otter Tail Power, said of the Big Stone retrofit. "It is prudent." She said contractors and suppliers already are bidding on the work, which would begin in 2013 and be completed during a several-week outage in 2015 or 2016.

Environmental groups led by the Minnesota Center for Environmental Advocacy in St. Paul had argued that Otter Tail Power should invest in other energy sources to reduce greenhouse gas emissions.