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Deal reached to restart Healy Clean Coal Plant

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Posted: Wednesday, October 3, 2012 6:16 pm | Updated: 11:34 am, Mon Jan 21, 2013.

FAIRBANKS – Golden Valley Electric Association and the state have reached an agreement with federal regulators to restart the dormant coal plant in Healy, a move that could bring a major source of relatively cheap electricity online within two years.

The parties have negotiated a proposed consent decree to operate the 50-megawatt facility, called the Healy Clean Coal Plant. It’s a huge step toward finishing an air quality permit, a requirement that has thwarted efforts by GVEA and the Alaska Industrial Development and Export Authority to reopen the facility.

Restarting the plant has been one of the key pieces of GVEA’s long-term plan to steer away from oil-fired power generation. As the price of oil has spiked, using those power plants has resulted in soaring electricity costs in the Interior. GVEA Interim President Cory Borgeson said it’s hard to say how much the plant could cut local utility bills, since electric rates are now affected by fluctuating oil prices, but he said significant savings are expected.

If the process continues as GVEA officials hope, the plant could be producing power in 18 to 24 months, Borgeson said.

Reaching the agreement with the Environmental Protection Agency required several concessions by GVEA.

In addition to a $50 million price to purchase the power plant from the state, the agreement calls for GVEA to install about $40 million in new pollution controls at the plant. Borgeson said GVEA also expects to spend roughly

$20 million on work to make the plant operational.

The agreement also moves up the timeline to install additional pollution-control equipment on another coal plant GVEA operates in the area, known as Healy No. 1. That $5 million upgrade will now be made in 2015, two years ahead of the previous schedule.

GVEA also will pay $250,000 toward a wood-stove upgrade program in the Fairbanks North Star and Denali boroughs, as well as $115,000 to the EPA to help offset federal expenses during the negotiations.

Kate Lamal, a consultant who previously worked at the utility on the issue, said the plant’s close proximity to Denali National Park and Preserve played a major role in the EPA’s demand for added pollution controls.

“That had everything to do with it,” she said.

The agreement, however, does contain a significant compromise by federal officials. They’ll allow GVEA to operate the plant for as long as 18 months before the new pollution controls are installed, giving the utility time to fine-tune its operations at the long-dormant plant.

Borgeson called the concessions a “fair deal” for GVEA to get the plant operational again, saying the costs associated with the upgrades are far cheaper than building a new power plant.

Reopening the plant has faced opposition by some environmental groups.

When the Alaska Department of Environmental Conservation issued an air quality permit for the plant in February, four groups — the Northern Alaska Environmental Center, Sierra Club, National Parks Conservation Association and Denali Citizens Council — filed an objection with the EPA, asking for further scrutiny of the permit.

Borgeson said those groups haven’t indicated they will protest the stipulated agreement with EPA, although they will have at least a 30-day public comment period to do so once the filing is published in the Federal Register.

Borgeson said the utility and the Department of Justice have been involved in long-running talks with the Sierra Club and the National Parks Conservation Association, although the groups weren’t part of the negotiations that led to the consent decree. After hearing their concerns in those previous discussions, Borgeson hopes the groups’ complaints have been addressed.

“We think they may find this acceptable,” Borgeson said.

A Sierra Club spokeswoman couldn’t be reached Wednesday evening to comment.

If the plant emerges from the process with an air quality permit, it will mark a turnaround for a long-troubled project.

The technology behind the plant is unique, using an experimental process to burn low-grade coal. After operating intermittently in 1998 and 1999, the $300 million state-owned plant was initially shuttered in 2000 due to safety and reliability concerns. It’s been closed since.

But Borgeson said the added expense of operating the plant has become more defensible as oil prices have soared.

“The economics have changed,” he said. “The cost of producing other types of energy are such that this plant is now economical at these higher costs.”

He said the $20 million in start-up and upgrade costs will address the previous safety concerns.

Even with those added expenses, Borgeson said the plant represents a significantly cheaper and more stable source of electricity than the plants it would offset.

The cost of using oil-fired generators varied between 18 cents and 53 cents per kilowatt hour in fuel costs in 2011, Borgeson said. Anticipated costs of operating the restarted plant will be 10 to 12 cents per kilowatt hour. The cost at other GVEA coal plants is as low as 6 cents per kilowatt hour.

Borgeson said prices should also stabilize, since GVEA will be able to sign a 10-year contract with the nearby Usibelli Coal Mine to provide coal for the plant.

Lamal said the additional pollution requirements will require about a dozen new employees at GVEA.

Contact staff writer Jeff Richardson at 459-7518.

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