North Dakota coal-to-fuel plant is still on hold

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BISMARCK, N.D. (AP) — Developers of a coal-to-liquid fuel factory proposed for western North Dakota say a decision on whether to build the $4 billion plant depends on a change in political climate. And backers are asking for a second extension of state aid to study the project.

“We still see the project as viable with great payback,” said David Straley, a North American Coal Corp. spokesman. “But until we get a read on the next Congress, we’re still in a holding pattern.”

Straley said the current Democrat-controlled Congress likely won’t pass energy legislation that would support the project. Using low-grade but plentiful lignite coal, the North Dakota factory would produce 460 million gallons of gasoline a year and generate electricity to power the plant and sell to markets in Minnesota and Wisconsin, backers say.

Dallas-based North American Coal Corp., along with Headwaters Inc. of South Jordan, Utah, and Great River Energy, of Elk River, Minn., formed American Lignite Energy LLC four years ago to oversee the project at a yet-to-be chosen site in western North Dakota.

Great River Energy withdrew from the project last year, said Lyndon Anderson, a company spokesman. He said Great River was interested in the project solely for electricity but the company is keeping pace with increased customer demand through other sources.

“The demand is less than what it was projected to be,” Anderson said. “We will have our needs met pretty much through the next decade.”

The North Dakota Industrial Commission in 2006 committed up to $10 million in state aid from coal tax collections to help weigh the project’s potential. Karlene Fine, the Industrial Commission’s director, said $1.3 million of the state aid has been used in studying the project.

The money is from a state coal development fund financed by a share of North Dakota’s severance tax on lignite mining. The full amount will be paid only if the plant is built.

The commission, whose members are Gov. John Hoeven, Agriculture Commissioner Doug Goehring and Attorney General Wayne Stenehjem, originally gave until the end of 2008 to decide if the project was feasible. That deadline was extended until the end of 2009.

American Lignite Energy has again asked the Industrial Commission to extend the deadline through 2010. Fine, the Industrial Commission’s director, said a meeting will be scheduled later this month to consider the extension.

“We’ve asked for a year’s grace period to get a read on the next Congress,” Straley said. “We’re waiting to get a clear signal.”

Sen. Byron Dorgan, D-N.D., who said he supports the project, believes such a signal is hard to predict.

Dorgan, who chairs U.S. Senate Appropriations Subcommittee on Energy and Water Development, announced last week that he would not seek re-election this fall.

Dorgan has pushed an energy bill that would increase oil production and renewable energy, such wind and solar.

Any new federal energy policies likely will be “environmentally friendly,” Dorgan said. “The proposed plant could be an example of that, he said.

Developers say they can capture at least 70 percent of carbon emissions from the plant before they enter the atmosphere and inject them underground, for storage or to force more oil or methane to the surface for processing.

Wayde Schafer, a North Dakota spokesman for the Sierra Club, said he hopes future federal energy legislation won’t be favorable to projects that cause carbon dioxide emissions.

“Putting research dollars and efforts into cleaning up fossil fuels seems like the wrong way to go,” Schafer said. “We should be looking at wind and solar, sources that don’t pollute.”

Only Australia has more proven lignite reserves than North Dakota, state officials say.

Straley said North Dakota can be a leader if the nation choses to shun more foreign oil.

Some small coal-to-fuels demonstration projects have been built over the last several decades but no commercial plant exists, Straley said. A demonstration project is done to prove the technology, not for production.

Straley said the coal-to-fuel plant would create about 700 jobs in the area, with an average annual salary of about $70,000.

“If this country really wants to get serious about jobs, we’ve got jobs,” Straley said.