Benson Power closing costly, and under challenge
BENSON — Kevin Bausman believes he is seeing the first signs of the economic losses Benson will experience if the Benson Power plant ceases operations later this year as expected.
Some of the power plant employees have listed their homes for sale, and that has slowed the real estate market, said Bausman, owner of Swift County Real Estate. He can't say that house prices have decreased significantly as a result, but he points out that they "definitely haven't gone up in the last year or so'' since news of the possible closing became public.
A newly released study by the Minnesota Department of Employment and Economic Development cites the expected closure of the biomass plant and loss of the 45 jobs it provides for the "significant negative impact'' it will have on the community. It does not examine the ripple effects that Bausman and others are watching.
The study, ordered last year by the state Legislature, identifies a loss of $28.1 million in annual sales for suppliers to the plant. They will face increased costs too, but those numbers are not known. Turkey producers will need to develop seasonal storage for litter otherwise hauled to the plant. Loggers will incur handling and disposal costs for low-grade pulp now sold to it.
Yet, overall, the study concludes the closure will have a "slightly positive net economic impact" when viewed from a statewide perspective, possibly helping create more jobs than are lost. "The positives of lower energy costs for consumers and businesses outweigh the negatives of the loss" of the jobs and sales, according to the study.
It also points out that there will be jobs and increased economic activity as Benson invests $20 million it will receive for economic development and infrastructure development.
Xcel has been under a state mandate to purchase electricity from the plant into 2028. It won legislative approval last year to buy out the owners of the plant and dismantle it. It plans to close the plant in August.
The company estimates that buying and shutting down the plant and purchasing replacement energy will cost $216 million, as compared to paying $561 million through the remainder of the contract, producing a net-present-value-savings of $345 million for ratepayers, according to filings with the Public Utilities Commission.
Earlier this year, the PUC approved the closure. Late last week, major suppliers to the plant filed appeals challenging the ruling. And just two weeks earlier, those suppliers and their attorneys appeared across the table from Xcel's legal staff in a Cass County courtroom, where a hearing was held on their civil lawsuit challenging the closing.
Along with the appeal and lawsuit, the suppliers are also going to the Legislature in hopes of convincing legislators to undo what they had done. Scott Dane, director of the Associated Contract Loggers and Truckers, said the group is hopeful. The group argues that legislators were misled by Xcel Energy and that the whole situation has "created a big mess for everybody.'' There are legislators receptive to figuring out how to solve it, he said.
The "big mess" that Dane refers to includes the losses that turkey growers selling litter, loggers selling wood, and truckers hauling those products expect to experience. The turkey growers affected range from Jennie-O Turkey Store to Pete Rothfork, a Stearns County turkey producer who sells 9,000 tons of litter a year to the plant.
Overall, the DEED study said turkey growers will lose $1.1 million a year in sales to the plant through 2028.
Woody biomass sellers will lose $2.8 million a year in sales.
Objections to the closing also came from the U.S. Forest Service and Minnesota Department of Natural Resources. Much of the wood harvested is from blowdown areas and helps reduce the fire danger while also aiding forest management in the Superior National Forest, they point out in filings to the PUC.
Truckers will be hit the hardest, to the tune of $24.1 million a year, according to the study.
Other losers in the equation include a Renville County cooperative and its 240 member-farmers, and Beaver Creek Transport, a Renville County-based trucking firm. The Renville County farmers are part of Bird Island Soil Service, which owns one-third of the North American Fertilizer plant taking ash from the biomass plant to produce fertilizer. It will lose $5.2 million in annual sales.
Along with the annual sales losses, the DEED study acknowledges there will be significant losses to the suppliers for equipment they purchased to serve the biomass plant. The study said the suppliers reported equipment purchases of over $100 million overall, and that these "sunk costs are worth noting.'' Some equipment can be used to support other customers, but some may be specialized and have no resale value, the study notes.
The Legislature had appropriated $150,000 for the economic impact study. DEED invested $10,441.09 to complete it. Dane and other opponents have criticized it, claiming it does not fully take into account the losses the closing will represent.
The study has come under criticism in Benson as well, where in a recent column in the Swift County Monitor News, Publisher Reed Anfinson points out that the impact of the job losses in the Benson area isn't assessed. He also points out that it does not take into account the $760,000 a year the plant pays in real estate taxes annually, with $400,000 of that going to the city of Benson and representing one-quarter of its tax base.