Loan proposed to save Interior power plant

Posted: Monday, April 25, 2005

WASHINGTON - Years ago, the federal government spent $117 million on an experimental "clean coal" power plant in Alaska designed to generate electricity with a minimum of air pollution - but the project never got up and running.

The plant, built in the late 1990s just outside Denali National Park and Preserve, never worked as it was supposed to, cost too much to operate and provided power only intermittently when it was tested, according to the utility company that was supposed to run it. Five years ago, the state closed it down.

Last week, the House came up with a solution: spend an additional $125 million in the form of government loans to convert the experimental "clean coal" facility into something that works.

Alaska officials say they expect that a retrofitted plant would spew no more air pollution than the original was designed to emit. But some environmentalists concerned about pollution in the park are skeptical.

The provision is buried deep inside a far-reaching, 1,000-page energy bill approved by the House on Thursday. The bill cryptically refers to the loan for "Department of Energy cooperative agreement number DE-FC-22-91PC90544" and omits the plant's location and name: the Healy Clean Coal Project.

Taxpayer and environmental groups described the provision as one of many ill-conceived subsidies laced throughout the House measure. The bill includes $8 billion in tax breaks and numerous additional incentives designed to boost domestic electricity production.

"It becomes sort of the poster child of wasteful energy subsidies," said Keith Ashdown, vice president of policy for Taxpayers for Common Sense, a budget watchdog group in Washington. "You pay for a clean coal facility to actually get finished, and now, because it's too expensive to burn more efficiently, they want even more taxpayer money to change it back."

Supporters of the plan, however, said the loan would help salvage a power plant that could be made to function with some technological changes.

"It's certainly not a boondoggle," said Chuck Kleeschulte, a legislative assistant to Sen. Lisa Murkowski, R-Alaska, who is working to get a loan provision added to the Senate version of the bill. "It's not the government throwing away money. It's a loan. They're getting the money back."

Kleeschulte said Murkowski will seek less money for the loan than is provided in the House legislation.

The loan was included in a 2003 version of the energy bill that emerged from a House-Senate conference committee but failed after a filibuster in the Senate. According to congressional staff, the original provision was inserted by lawmakers from Alaska and, like most other provisions, was carried over into this year's bill.

The owner of the power plant, the state's Industrial Development and Export Authority, is trying to figure out what to do with it. Among the options being considered are selling the plant as is or making changes to make it functional. The authority, which said about $300 million was spent on plant construction and testing, has not taken a position on whether it needs the federal loan.

Gov. Frank Murkowski supports the measure. Michael Menge, a senior adviser to Murkowski, who championed the loan when he was a senator, said, "That loan guarantee would allow the plant to come up to specifications."

The state originally became interested in building the facility because the technology held the promise of turning waste coal into electricity. Alaska applied for and won a grant from the Department of Energy.

The Energy Department has taken no public position on the loan, a spokesman said.

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