Developers abandon plan for SD power plant

Developers of a $1.6 billion electric power plant in northeastern South Dakota abandoned the project Monday, saying they were unable to recruit other investors after one of the principal utility backers pulled out.

The Big Stone II plant, planned for construction next to an existing power station near Milbank, S.D., was meant to supply about 550 megawatts of power to utilities in North Dakota, South Dakota and southern Minnesota.

It had the necessary permits from state regulators to begin building, but financing the plant's construction proved to be too difficult, project officials said.

Representatives of environmental groups celebrated the project's demise, saying continued development of a large, coal-fueled power station went against national trends favoring wind power and other renewable energy sources.

"This is happening in the context of coal plants around the country being abandoned," said Margaret Levin, state director for the Minnesota North Star chapter of the Sierra Club.

"I would certainly attribute this outcome to an increased understanding ... that we have got to switch away from coal and other dirty forms of power," Levin said.

Supporters of Big Stone II said the end of the project could force utilities and their customers to buy more expensive electricity.

The project included construction of new and upgraded high-voltage power lines in southern Minnesota that could carry power from new wind-powered generators as well as from Big Stone II.

Steve Kolbeck, vice chairman of South Dakota's Public Utilities Commission, said construction of Big Stone II and improvements to the nearby power plant would have cut total pollution from the site while greatly increasing its output.

"If we could have gotten it built ... we could have actually made the air cleaner up there," Kolbeck said.

A group of seven utilities were partners in the project when it was announced in June 2005. Planners said they hoped to begin construction of a 630-megawatt plant in 2007 and have the plant operating by 2011.

Two partners, Great River Energy, of Maple Grove, Minn., and the Rochester-based Southern Minnesota Municipal Power Agency, withdrew in 2007. The project's death blow, however, did not come until last September, when Otter Tail Power Co. withdrew. The Fergus Falls, Minn.-based utility was the project's original managing partner.

Otter Tail's president, Chuck MacFarlane, said the slumping national economy and uncertainty about future federal environmental regulation made it difficult to finance the new power plant.

On Monday, Big Stone II's remaining partners - Montana-Dakota Utilities Co., of Bismarck, N.D., Missouri River Energy Services, of Sioux Falls, S.D., Heartland Consumers Power District, of Madison, S.D., and the Central Minnesota Municipal Power Agency, of Blue Earth, announced in a brief statement that the plant would not be built.

Mark Hanson, a Montana-Dakota spokesman, said the plant's output had been scaled back to about 550 megawatts. The remaining partners had agreed to take about 350 megawatts, but other takers for the remaining 200 megawatts could not be found on short notice, Hanson said.

"This was a lot of hard work and a very thorough process," Hanson said. "It's disappointing when you have a fully permitted project that is considered the (most economical) option, and it would have been environmentally sound."

South Dakota Gov. Mike Rounds, in a statement relayed by spokesman Joe Kafka, said that while the project's demise "is not a surprise, it is still a disappointment."

North Dakota and South Dakota now are likely to lose up to 1,000 megawatts of electric transmission capacity that could be used to expand the wind power industry in both states, Rounds said.

"This may very well set back wind generation plans until new transmission capacity is established," he said.