North Dakota lignite program has little to show from years of funding; only 1 project built

EnergyAssociated Press

Fifteen years after North Dakota began funding research aimed at revitalizing growth in the state's lignite industry, all but one project has been abandoned or yielded little more than expensive studies that have failed to find a clean and cost-effective use for the state's plentiful but low-grade coal, data obtained by The Associated Press show.

Some say it may be time to reevaluate North Dakota's lignite research fund, which was established to boost the use of the coal as an energy source and economic engine for the state. Others blame the lack of progress on lignite projects on uncertain coal legislation.

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"We still need some kind of clarity on what the rules of the road are going to be," said Steve Van Dyke, a spokesman for Lignite Energy Council, a Bismarck-based trade group. "There has basically been a de facto moratorium on building anything with coal."

Wayde Schafer, a North Dakota spokesman for the Sierra Club, said the state would be better off spending the research funding on looking into other types of energy.

"It's time to look at all energy sources, including alternative and renewables to see if we can't produce some actual jobs and new innovation," Schafer said. "Otherwise, maybe we should fund a study to see if blacksmithing can come back too."

North Dakota's lignite mines produce about 30 million tons of coal annually. The fuel is burned in nearby electric power stations and the Great Plains Synfuels factory near Beulah, which converts lignite into synthetic gas. North Dakota's vast lignite reserves are second only to Australia's.

The Lignite Vision 21 Project is aimed at identifying better technologies for mining lignite, generating electricity from it and transmitting the power; and ensuring that the industry doesn't harm the environment. The research money is financed by a share of North Dakota's severance tax on lignite mining. Most of the tax, which generates about $11 million annually, goes to the state and coal-producing counties, cities and school districts.

North Dakota's Industrial Commission oversees the lignite research fund. Gov. Jack Dalrymple, who heads the three-member panel, defended the research program, saying, "the likelihood of success — that's not the nature of basic research. There are no guarantees."

Data requested from the Industrial Commission by the AP show the state has spent $11.5 million since 2000 funding five projects. Three of the projects were abandoned, including one this year that examined the viability of building a $4 billion proposed coal-to-liquid fuel plant.

The state is allowed to recoup part of its money once the projects are abandoned or become operational. To date, the state has been reimbursed $1.7 million.

The only project to be built has been Great River Energy's plant in southeastern North Dakota, which began producing electric power last year. Construction of the power plant was finished in 2010, but its startup was delayed due to a drop in demand for electricity in Minnesota. The plant also uses steam energy that will be used by a nearby malt processing plant and an ethanol plant being built in the area.

One project has been on the drawing board in various forms for 14 years, after the Industrial Commission committed up to $10 million in research money to Great Northern Project Development LP, a Houston company that controls vast coal reserves in southwestern North Dakota. The company has been developing a massive coal mine complex near South Heart. It originally proposed construction of a power plant but also has studied a synthetic natural gas factory and a facility to turn lignite into liquid fuels.

Rich Voss, a company vice president, said the Great Northern is looking at all of its options for using lignite but it will depend on "technology, markets and politics."

The company has spent $6.4 million in state aid on the project since 2001, though none in more than two years.

"The owners are committed to making things go and they want to do it right," Voss said.