Minnkota’s Project Tundra: A billion dollar boondoggle?

Updates on Project Tundra: October 19, 2020

If you’re concerned that Project Tundra may raise your electric rates, make sure to sign this petition from our friends at CURE showing Minnkota Electric Cooperative that you don’t want them to move forward with this billion dollar boondoggle.

If you’re looking for more information on the project, check out this recording of a webinar from the Institute for Energy Economic and Finanical Analysis (IEEFA) on their recently released report, “Project Tundra: A Step in the Wrong Direction.”

And please make sure to share this information with your fellow cooperative member-owners via email or social media.

Read on for some history and context on Project Tundra!

 If you live in rural, northwestern Minnesota, chances are that your power comes from the Milton R Young coal fired power plant, owned by Minnkota, in Center, North Dakota.

Minnkota Power Cooperative is a Generation and Transmission cooperative, a collective made up of smaller cooperative utilities to handle producing (generating) and distributing (transmitting) electricity. Minnkota was created by eleven rural electric cooperatives¹ and several city owned utilities in northwest Minnesota and northeast North Dakota, and has a responsibility to its member-owners both to have fair electric rates and to take the climate crisis seriously.

Research has found that many U.S. coal plants are more expensive to keep open than to replace with renewable energy. Another cooperative utility in Minnesota, Great River Energy (GRE) is retiring their coal plant and replacing it with cheaper, cleaner, wind, solar, and battery technology. This will result in lower costs for member-owners and significant reduction in carbon pollution.

And this is to say nothing of the climate costs of the coal plant. Each year, the Milton Young facility emits over 3 million tons of carbon dioxide - equal to the yearly emissions of over 700,000 cars! We can see the results: climate change exacerbates flooding in the Red River Valley, worsens asthma for already at risk populations, and is destroying ecosystems in northern Minnesota.

So what is Minnkota’s plan for the expensive, dirty Milton Young coal plant? Rather than following a proven, common sense approach -- retire the Milton R Young coal plant and replace it with renewable energy -- Minnkota is spending $1.1 billion on an unproven technology on coal plants called Carbon Capture Sequestration (CCS). (For some context: Minnkota’s current assets - the total worth of everything they own - is about $1.1 billion.)

CCS projects attempt to capture carbon from sources like coal plants before it is emitted. The carbon is then sequestered deep underground or sent via a pipeline to frack oil, further contributing to the climate crisis.

In some contexts - like cement factories - CCS technologies appear to function as promised. But they have failed on other coal plants.

The Institute for Energy Economic and Financial Analysis (IEEFA) recently released a study on the Petra Nova CCS project at a coal plant in Texas. Petra Nova was mothballed because it was not actually capturing as much carbon as promised. Some estimates found it only captured 7% of carbon emissions compared to a promised 90%. In addition, according to IEEFA, costs more than doubled in the process of building it, and it lost money year after year in its three years of operation.

Minnkota’s CCS project is called Project Tundra. Minnkota claims that Project Tundra, when complete, will capture 90% of carbon and will cost $1.1 billion total to build.

But if this project fails as badly as Petra Nova, who will end up footing the bill? Our partners at CURE (Clean Up the River Environment) created this graphic, showing that Project Tundra could cost each co-op member-owner $8000!

Graphic Credit: Clean Up the River Environment

Check out their website with more details and for a petition to sign opposing Project Tundra.

How Does Minnkota Propose to Pay for Project Tundra?

Proponents of CCS projects like Project Tundra claim that the cost will be recouped through a tax credit, called 45Q, after the rule number assigned by the IRS. 45Q tax credits are worth $50 a ton for carbon that is sequestered underground or $35 a ton for carbon that is used to frack oil (“enhanced oil recovery”).

The Petra Nova project ended up costing $60 per ton of carbon captured - which means that after the 45Q tax credit, the company lost money for each ton of carbon captured. In principle, a company could make money by selling the carbon to an oil company to frack oil and by getting a tax credit. But given the recent collapse of the oil industry, what oil company is looking to expand operations right now? (In fact, Minnkota recently announced that they would not be pursuing enhanced oil recovery)

But here’s the catch: Minnkota is a cooperative, which means that it is a nonprofit and thus does not pay federal income taxes.

So how will they take advantage of tax credits?

By finding a “financial partner” who will directly own the CCS technology, even if they didn’t pay for the cost to build it. A financial partner will be a big bank - like JP Morgan Chase or Citibank, or an investment firm like BlackRock or Goldman Sachs. This bank will technically own Project Tundra and can then take advantage of the tax credits.

In other words, our tax money will go to a big Wall Street bank to cover the costs of technology that has already failed on other coal plants. And if the project fails altogether? Who will end up paying the outstanding debt Minnkota spends to build Project Tundra?

And this is to say nothing of the millions of tax dollars that are already being spent in research and development on the project, all amounting to a massive taxpayer funded subsidy for an old, outdated coal plant when clean, renewable energy is a proven, cost effective alternative.

Minnkota’s members deserve better. If you’re angry about this -- and you should be! -- take a minute to sign this petition from our friends at CURE: stop Project Tundra.