Coal co. suspends efforts to build ND power plant

After seven years of planning, a coal company has suspended development of a 500-megawatt power plant in southwestern North Dakota because of uncertainty about federal carbon dioxide rules, a company official says.

Westmoreland Power Inc. is returning $562,500 in state subsidies for the Gascoyne project, said Keith Alessi, the executive chairman of parent company Westmoreland Coal Co. The money came from a North Dakota research fund that is financed by a tax on coal mining.

Electric power plants that are fueled by coal are a major source of carbon dioxide. The gas has been linked to global warming, and Congress is preparing to debate legislation to regulate carbon dioxide emissions this summer.

"There is much uncertainty in the utility sector on when future carbon regulation will come into effect. This has slowed the development of coal-fired power plants," Alessi said in a letter to Karlene Fine, the director of North Dakota's Industrial Commission. The commission administers state coal research grants.

"At this time (we) cannot predict when a long-term customer (for the plant's electricity) can be found and the actual plant construction could commence," Alessi's letter said. "Westmoreland does intend to continue development of the Gascoyne site. We cannot guarantee that this will take place ... any time soon."

The Industrial Commission had agreed to commit up to $10 million in research money to the Westmoreland project, which included the development of a new coal mine. A Westmoreland subsidiary operates the Beulah Mine, which supplies coal to the Coyote and Heskett power plants in western North Dakota.

Gov. John Hoeven, the commission's chairman, said the money now may be used for other initiatives.

"These projects evolve depending on the technology, on the requirements for emissions management, all of those things," Hoeven said. "We kind of knew (Westmoreland was) in this situation ... We need to make sure that we've got the dollars to put behind the projects that continue to develop."

Westmoreland, which is based in Colorado Springs, Colo., had applied for a state Health Department air quality permit for the plant. Terry O'Clair, director of the agency's air quality division, said Tuesday the application has been delayed because of uncertainty about federal mercury emissions rules.

Critics of the proposed plant have also questioned whether it would create pollution and haze problems in the south unit of the Theodore Roosevelt National Park, which is about 60 miles to the north.

The Westmoreland announcement is the most recent North Dakota electric power plant initiative that has stalled because of questions about carbon dioxide regulation, air pollution and the capacity of the region's electric power transmission network.

Great River Energy, of Elk River, Minn., which operates power plants near Stanton and Underwood, studied a proposal to build a third in western North Dakota before dropping the idea about five years ago. Great River supplies power to electric cooperatives that serve customers in Minnesota and Wisconsin.

Great Northern Power Development LP, which owns vast coal reserves in North Dakota and other states, mulled construction of a power plant in western Stark County before deciding instead to build a factory to make synthetic natural gas from coal.

Westmoreland and Montana-Dakota Utilities Co., a unit of MDU Resources Group Inc. of Bismarck, began planning the Gascoyne electric power station in 2001. That year, Westmoreland completed its purchase of coal reserves in the area held by another MDU Resources unit, Knife River Corp.

Montana-Dakota withdrew from the Gascoyne project in May 2007, saying it intended to concentrate on Big Stone II, a proposed power plant in northeastern South Dakota. Westmoreland continued the Gascoyne initiative by itself.

Big Stone II's future is in doubt after two Minnesota administrative law judges recommended that the state not allow construction of new power lines that the plant would need to export its electricity to Minnesota customers.

Great River Energy, which was one of the founding partners of a group of utilities that was developing Big Stone II, withdrew from the consortium last September.