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Enron Mail |
Naveed/John--as you know, I did meet here in Minneapolis today with Julie J= orgensen and Tom Micheletti of Exclesior Energy Inc. regarding their propos= al for the Mesaba Energy Project. I basically went over the questions that = I had expressed to you guys on Friday. Ultimately, they will need a tremen= dous amount of political capital to get all the pieces of the deal included= in legislation. Please keep in mind that the Senate in Minnesota is contro= lled by the Democrats and the House is controlled by the Republicans. The = Governor is independent, and the primary agencies in his administration tha= t would be involved in approving/promoting this deal would the the Pollutio= n Control Agency (PCA) the Dept of COmmerce, the Enviromental Quality Board= (EQB) and to some degree, the Public Utilities Commission (PUC). The generation piece of their project is probably quite doable from a regul= atory and legislative standpoint. The site that they have identified (and = I understand they may have 2 other possible sites) is in a district of the = state that is currently economically disavantaged. The Iron Range legislat= ive delegation is strong at the Capitol, and the Majority leader of the Sen= ate is from the Iron Range (Roger Moe). Because of the amount of jobs tha= t would be created and the fact that the project would be considered a "cle= an" fuel would go a long way to allowing regulatory approvals and incentive= monies such as the funding proposed by the IRRRB and other state agencies.= Although we didn't specifically discuss tax incentives, there could very = possibly be some assistance provided as well. There would most likely be an= appetite for including language in a legislative package to either exempt = or "fast track" the generation siting process that is currently cumbersome = in the state. The much larger issue is the transmission build out. My understanding is t= hat Excelsior's current strategy is to try to include in legislation a desi= gnation of the right of way for the transmission to be built from the Iron = Range into the load centers--Minneapolis and St. Paul. In essence, they hop= e to have legislation that would circumvent the current siting statute and = rules for transmission. Their reasoning is that all of the Democrats would= vote for this proposal and they would just need to pick up a handful of Re= publicans. There are several concerns about this reasoning--the enviromenta= l community, the local cities/counties that the line would run thru,, the n= eighborhood groups--just to name a few. While I agree that most Democrats w= ould vote party line because of jobs (and I think that even more jobs are l= ost in the next 18 months due to economic downturns in the taconite/steel a= nd paper/pulp markets), some of them will get picked off by the constituenc= y groups. Excelsior would need to get "buy off" from these groups, which w= ill be expensive (hence, the wind proposal) in order to obtain their suppor= t at the legislature. This would be difficult. A fall back position if Exc= elsior was not able to circumvent the current siting and permitting process= would be to have the legislation "fast track" the process.=20 The other significant issue is the PPA. My understanding is the Excelsior = invisions legislation that would "force" the utility (most likely Xcel/NSP = because they are the only IOU that has needs identified) to buy the power u= nder a PPA and that the rate or at least the parameters that the rate must = fall within would be actually included in legislative language. This is go= ing to raise all kinds of protests from various groups, not the least of wh= ich would be the industrial buyers in the state who are active in PUC regul= atory proceedings--they will argue that they will bear the brunt of higher = rates that would be incurred by such a contract rather then Xcel sourcing t= hru a competitive bid. From a simplistic standpoint, it would seem that a = better route would be to get the munis and coops in the state to bid on the= output and avoid the significant obstacles that PPA language in the legisl= ation would encounter.=20 Exclesior has not yet gotten strong sign off from either party or the Gover= nors office. They have met with the Senate leadership, and have gotten a p= reliminary blessing. They have had meetings with Governor Ventura's office= and his Administrative agencies, and my sense is that they will get some b= acking from the PCA and the Dept of Commerce. They may run into trouble wi= th the PUC and the EQB. Ultimately, though, if they convince Ventura, the = agencies will fall into line. They have not =20 yet pitched the idea to the Republicans. They have hired a republican lobb= yist who is knowledgeable in energy fights. So....my assessment at this time would be as follows: =20 =091. the development team has some credibility--Jorgenson has a reputatio= n as a good developer. Michaletti is well known at the capitol--he has some= strong ties to the range delegation, but he also has some legislators that= don't like him at all (especially those on the enviromental side and some = women). They would need to supplement their efforts with one or more outsi= de lobbyists. =092. they still have alot of work to do to see if the project is politica= lly palatable to a wide range of constituencies. The democrats and unions = are the only natural constituencies for them. The legislative session runs= from January to May. My bet would be that it would take 2 sessions to get= a deal of this size done, unless that have STRONG support from the democra= ts and republicans going into January.=20 =09 =093. wild card could be the munis and coops as well as the economy. If t= he munis and coops buy into the concept and want the transmission line buil= t in order to serve their needs, they have political grass roots in each an= d every county of the state (Minnesota has approx 120 munis and 40 coops). = If the economy takes an even bigger nose dive, Democrats will be forced to= support whether there are environmental consequences to the tranmission li= nes or not. I will try to call you in the morning to discuss. Hope this is helpful and= I am happy to discuss with other members of your team and obviously willin= g to help in implementing strategy if you decide to move forward with a str= onger look at the project. =20
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