By Joe Smyth | @joesmyth
A proposal to build a carbon capture project at a coal plant in North Dakota faces delays, higher than expected costs, and a key contractor who said it won’t construct the facility, according to documents obtained through the Freedom of Information Act.
The documents, which are quarterly reports submitted to the Department of Energy by the coal plant operator Minnkota Power Cooperative, also show several efforts to cut costs for the proposed carbon capture project that could create new environmental risks, such as burning waste from the carbon capture process in the coal plant and injecting wastewater underground.
Engineering studies for the coal carbon capture proposal, known as “Project Tundra,” have been funded mostly by US taxpayers through the Department of Energy. Minnkota is also reportedly seeking a $700 million loan guarantee from the Department of Energy Loan Programs Office. Additional financing could come from North Dakota’s public bank – though the bank initially declined to lend for the project until North Dakota legislators passed a state law this year that could transfer risks to North Dakota taxpayers.
Engineering studies show higher than expected cost estimates for Project Tundra
“Project Tundra” is a proposal to build what would be the world’s largest carbon capture facility at the Milton R. Young coal plant in North Dakota. The 50-year-old coal plant is operated by Minnkota Power Cooperative, a generation and transmission association that sells power to 11 electric cooperatives in northwest Minnesota and eastern North Dakota. Minnkota created a website with information about the “approximately $1 billion” coal carbon capture proposal, videos, and several press releases touting progress.
But quarterly reports that Minnkota Power Cooperative has filed with the US Department of Energy (DOE) over the last two years show a different reality: higher than expected costs, missed deadlines, and a key contractor that said it won’t build the project.
Fluor Corporation, the global engineering and construction firm, is working with Minnkota Power Cooperative on the Front End Engineering and Design (FEED) study, which has been funded mostly by DOE. Minnkota Power Cooperative has submitted the quarterly reports to DOE since 2019, which EPI obtained through a Freedom of Information Act request.
Recent quarterly reports show that the cost estimates to build the carbon capture facility are higher than expected, although the reports don’t provide specific figures.
In a quarterly report submitted to DOE in April 2021, Minnkota Power Cooperative explained: “The preliminary FEED cost estimate from Fluor was issued at the end of February. Based on that preliminary estimate, an intense cost reduction effort was initiated in an attempt to lower the overall cost of the project.”
Items that Minnkota identified as contributing to higher cost estimates include updated costs for building a 16 mile gas pipeline and gas boilers to provide steam for the carbon capture facility. Minnkota initially had decided to provide steam to the carbon capture facility with new gas boilers instead of using steam from the coal plant, but higher than expected costs for the gas boilers and pipeline led Minnkota to reconsider using steam from the coal plant.
Petra Nova, the only coal carbon capture facility in the US until it was shut down last year after suffering various mechanical issues, used a gas plant to provide steam and power to its carbon capture facility. Emissions from the gas plant were not captured, which canceled out a portion of the emissions captured from the coal unit. Using steam and power from the existing coal plant instead would reduce the amount of electricity generated by the coal plant.
Fluor Corporation told Minnkota Power it won’t build Project Tundra
The quarterly reports also show that shortly after Fluor Corporation provided Minnkota with the higher than expected cost estimates, Fluor senior management informed Minnkota that “Fluor will be unable to be the construction contractor for Project Tundra.”
It is not clear if Minnkota has found another company to build Project Tundra if the project moves forward. In a quarterly report submitted to DOE in July, Minnkota said “The process to select a replacement construction contractor is progressing slower than anticipated.” Minnkota said that “could have schedule and cost impacts for the project,” as could the decision to consider using steam from the coal plant instead of new gas boilers.
A spokesperson for Minnkota Power Cooperative would not respond to questions about why Fluor Corporation would not be the construction contractor or whether Minnkota has been able to find another company to fill that role, saying only: “Due to confidentiality and non-disclosure obligations, we cannot provide additional information.”
A spokesperson for Fluor said, “Fluor is still involved in the project and intends to continue participating in the implementation phase of the project,” and that any other info would have to come from Minnkota.
Minnkota blamed “delays caused by the change in the construction contractor” in requesting a six-month extension of the project in June; DOE granted the extension, extending it until December 31, 2021. This was Minnkota’s second extension. DOE granted the first six-month extension in December 2020. Neither Minnkota nor DOE appears to have informed the public about the extensions, which have extended the length of the Project Tundra FEED study from 15 months to 27 months.
Minnkota considering cost-cutting measures that could create environmental risks
The quarterly reports detail a variety of measures that Minnkota is considering to reduce costs, some of which could create other environmental risks.
One report shows consideration of the potential to dispose of the solvent waste created during the carbon capture process by burning it in the coal plant, “which would obviate the need for separate waste disposal and associated costs.” If that weren’t possible, Minnkota also was “evaluating the characteristics of the waste as potential hazardous waste.”
A later report shows Minnkota also considering disposing the solvent waste in the landfill it currently uses for the coal plant, which it said would require amending its landfill permit. Another report shows Minnkota still considering burning the solvent waste in the coal plant.
One quarterly report also reveals a decision to inject cooling tower blowdown water underground because “it is currently anticipated as the lowest cost for water treatment options.”
A later report shows the need to prepare an “aquifer exemption request” to inject that waste water underground.
Another report shows a discussion about managing oxygen levels in sequestered carbon dioxide since “Oxygen impurity in the CO2 product can have impacts both in the pipeline (i.e. corrosion or compression requirements) and in the subsurface. The project team decided that deoxygenization processes would not be required in part because “the pipeline length is short.”
Pipelines transporting compressed carbon dioxide can present serious risks if they are compromised. A recent Huffington Post/Climate Investigations Center investigation detailed the impacts of a ruptured carbon dioxide pipeline to the community of Satartia, Mississippi last year, which sickened dozens of residents.
Minnkota lost private lender, now seeking DOE and North Dakota public bank financing
Project Tundra faced considerable risks even before the delays and higher cost estimates became apparent.
A report last year by the Institute for Energy Economics and Financial Analysis warned that Project Tundra “faces significant risks and uncertainties that could undermine its economic viability and lead to higher electric rates for the ratepayers of the cooperatives that buy power from Minnkota.”
Like other coal carbon capture proposals, Minnkota has faced challenges in attracting investors. At an event in Bismarck last month, a Minnkota representative told Goldman Sachs CEO David Salomon that the power supplier had lost its original potential financial partner.
“Early on in our project, as we were bringing on our development staff and looking for an outside financial advisor, we paired with a multinational bank that had a real interest in this project,” [Minnkota representative Stacy Dahl] said. “And it wasn’t very long into that relationship when the broader parent company made the decision that no more investment in coal. No more relationships with coal. Full stop, even if this was a technological solution.”
Salomon offered to connect the Minnkota representative with Goldman Sachs staff, but also explained to the audience, “You know the reality that I think that we all have to accept – the institutional capital world is done with coal.”
Minnkota is now reportedly seeking a loan backed by taxpayers for Project Tundra, through the US Department of Energy Loan Programs Office. S&P Global reported in June that “Minnkota is seeking a $700 million DOE loan guarantee and expects to tap into a new $250 million state loan program designed specifically for Project Tundra that was signed into law in May.”
The new North Dakota state loan program was created after North Dakota’s public bank initially declined to lend to Project Tundra until the North Dakota legislature passed a new law this year that could transfer the risk to North Dakota taxpayers. The Grand Forks Herald reported in June:
But when lawmakers approached the Bank of North Dakota, the country’s only state-owned bank, about taking on the loan program, bank officials declined, saying they would never approve a loan of its magnitude, subsidized interest rates or risk on their own balance sheet.
Instead, they wrote language for the bill that made up to $250 million available to the state for lending, with the condition that the Legislature or the state’s top regulatory board provide a reimbursement so the bank wouldn’t assume liability.
That reimbursement would likely be covered with taxpayer dollars, Senate Majority Leader Rich Wardner, R-Dickinson, said, though there are numerous state funds the Legislature could pull from. Lawmakers hope federal carbon capture tax credits would cover the costs over a longer period.
Minnkota is also seeking additional support from US taxpayers for Project Tundra, by increasing 45Q tax credit amounts for carbon capture facilities. Lobbying disclosures show Minnkota paid lobbyists this year to lobby for “Tax legislation relating to carbon capture and storage, including IRS Section 45Q and 48A.” Other coal carbon capture developers like Enchant Energy are also lobbying to increase 45Q tax credit amounts.
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