Power plant phase-out to impact local economy

Fergus Falls, Minn., plant closure will affect city income, railroad

BY KRIS BEVILL

Otter Tail Power Co.’s Hoot Lake plant near Fergus Falls, Minn., generates approximately 140 megawatts of power using subbituminous coal railed in from Wyoming. The company is phasing out the facility in response to tightening emissions standards and will close the plant in 2020. PHOTO:

Changing federal regulations regarding emissions outputs at the nation’s power plants will impact operations at northern Plains’ coal-fired power plants to varying degrees, depending on the age of the facility, the type of coal used and the types of technology installed at the plant to limit emissions. For Otter Tail Power Co., tightening emissions standards mean the company will phase out its 138-megawatt Hoot Lake Plant in Fergus Falls, Minn. The plant has two coal-fired units, the first of which came online in 1959, and uses subbituminous coal delivered via rail from Wyoming. The plant will be phased out of commission and will close permanently in 2020.

Brad Tollerson, director of resource planning and power services, says the U.S. EPA’s Mercury and Air Toxics Standards will require the Hoot Lake plant to reduce its mercury emissions by nearly 60 percent and its particulate emissions by 16 percent beginning in 2015. He says the company had three options with regards to MATS compliance: Either shut it down in 2015, carry out minimal upgrades to extend its life until 2020 or perform extensive upgrades to allow the plant to operate until 2040. The Hoot Lake plant is the oldest of Otter Tail’s three coal-fired power plants and is already nearing the end of its life, so it was determined that the second option was the most viable. The company is investing $8.6 million to carry out minimal upgrades to comply with MATS, including upgrading its existing equipment to collect particulate matter and installing new equipment to collect mercury emissions, which will allow it to operate until 2020.

Otter Tail intends to replace the facility, but it is unknown whether a new facility will be built in the same location or elsewhere in the region. There are benefits to building a new power plant at a brownfield site such as the Hoot Lake site. However, the most likely source of fuel for a new plant is natural gas, and the Hoot Lake site does not currently have the gas supply infrastructure needed to support a gas-fired plant. To install a supply line from the nearby Alliance or Viking pipelines would cost an estimated $40 million, so Tollerson says other site benefits such as electric transmission access, water, ownership and general infrastructure would have to outweigh that cost in order to warrant a new plant in that location.

Ownership of a new plant is yet to be determined as well, but anticipated load growth throughout the region will likely require that Hoot Lake’s replacement plant, wherever it is located, will be built to generate approximately 200 megawatts. To complete the project, Otter Tail may team up with another entity or go it alone.

It is not clear when the company will determine the new facility’s location. At a recent economic outlook session held in Fergus Falls, Tollerson noted that the phase out gives the company time to build confidence in natural gas prices and evaluate changing environmental rules. The new facility is expected to become operational in 2020 or 2021.

The shutdown of the Hoot Lake plant will have a noticeable impact on Fergus Falls. The company, which is headquartered in Fergus Falls and employs about 400 people there, paid $1.5 million in property taxes in 2012, making it a major contributor to the city’s economy, says Mark Helland, vice president of customer service. The Hoot Lake plant currently employs 45 people and is responsible for the bulk of property taxes the company pays to Fergus Falls, he says. He noted that even if the facility is replaced in Fergus Falls, the new plant will have a lessened impact on the economy because it will no longer require coal shipments by railroad and will likely pay less in property taxes. The company is not anticipating layoffs as a result of the Hoot Lake plant closure, however, because many of its employees are nearing retirement age and will likely retire on or before its closure, Helland says. Remaining employees will be given opportunities at other locations. PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com