Great Lakes Article:

Thunder Bay plant considered

U.S. firm looks at selling power via cable under Lake Superior to Michigan

BY JOHN MYERS NEWS TRIBUNE STAFF WRITER
5/9/2002

A U.S. partnership is joining with municipal utilities in Ontario to build a power plant in Thunder Bay and move the electricity through cables laid under Lake Superior to Michigan's Upper Peninsula.

Participants in the project also have talked about shipping electricity down Minnesota's North Shore from Thunder Bay, although those plans so far haven't advanced.

The project, construction of which could begin this summer, would include a 1,120-megawatt coke gasification plant in Thunder Bay and a 90-mile underwater electrical cable laid from the Pigeon River at the Ontario-Minnesota border to the Keweenaw Peninsula in Michigan.

It would be the first such major power line under Lake Superior, officials said, although a similar Canada-to-U.S. line runs under Lake Erie and another such line is being proposed there.

The proposed power plant would use petroleum coke, a waste product in the oil and gas fields of the Canadian prairie provinces, as fuel. The coke would be moved by train to Thunder Bay where it would be turned into gas in a closed system called gasification.

The Thunder Bay project is a joint venture between SynFuel of Glen Carbon, Ill., the Fort William First Nations and the Northwest Energy Association, a partnership of six municipal utilities in northwestern Ontario.

"We hope to see a shovel in the ground this summer,'' said Larry Hebert, general manager of Thunder Bay Hydro, part of the Northwest Energy Association. "We still have to clear the regulatory hurdles. That's going to happen; it's just a matter of when.''

The power plant would cost about $1.4 billion (U.S.), and transmission lines would cost about $700,000 per mile on land and $1 million per mile underwater, Hebert said. The project could total nearly $6.6 billion if all proposed transmission lines are built, including lines to remote villages in northern Ontario -- a critical aspect of the plan.

Hebert said plans also have been discussed with Duluth- based Minnesota Power to transfer electricity from Thunder Bay into Minnesota, although those plans are not advancing at this time.

"If we're going to be right to the border with our new lines, it makes sense. It's just a matter of getting down to their lines closer to Duluth, maybe (off the) shore there,'' he said.

Minnesota Power officials said those plans haven't progressed past the talking stages and are not being pursued. Officials said the process of building transmission lines even the short distance to Pigeon River would be prohibitive.

"We talked, but there's nothing there,'' said Eric Olson, Minnesota Power spokesman.

The Thunder Bay project follows several electrical plants proposed for Northeastern Minnesota -- planned for economic development and not demand. Most of the electricity will be shipped to far-off places, and that has some people concerned.

While emissions for gasification plants tend to be lower than coal-burning plants, Julian Holenstein, director of Environment North, a community watchdog group in Thunder Bay, said residents have been provided with few details.

"Especially on the emissions part, we really don't know what they are proposing. I'm not sure how solid this whole thing is,'' Holenstein said. "It's also quite shocking to think that we're going to be using our Great Lakes as corridors for electricity and gas and whatever. I don't think that's appropriate at all.''

The group Great Lakes United is calling for a ban on any new cables or pipelines under any of the Great Lakes.

SynFuel is involved in a similar coke gasification project in Oklahoma, said Bob Van Patten, president of the firm. The gas produced by the Oklahoma plant is captured for use in a nearby ammonia nitrogen fertilizer plant. Such a spinoff also is a possibility for the Thunder Bay plant. Gas from the Thunder Bay plant could be shipped to areas such as Detroit or Chicago.

The Thunder Bay plant could be running with 120-megawatt output within two years, and expand by 500 megawatts in four, Van Patten said. Another 500 megawatts of output could be added, to make the total 1,120 megawatts.

But to go that large, the transmission network has to be in place, and the end customers must be in place, Van Patten said. "That's way more power than Thunder Bay will ever need.''

The plant's exact location hasn't been determined, but it will be on Fort William First Nation (tribal) land just outside Thunder Bay.

One key aspect to the project's success, Hebert said, is the deregulation of Ontario's electrical generation and transmission system coming May 1. Until then, Ontario Hydro has had a virtual government-sanctioned monopoly on electricity in the region.

In addition to about 200 full-time jobs, Hebert said the new electrical plant could be the catalyst for several new companies moving into the Thunder Bay area, which has lost population in recent years.

But it appears most of the new power generated at the plant would go to the United States and to remote areas of Canada. SynFuel's investors want to sell the electricity at U.S. rates while building the plant with cheaper Canadian dollars. The U.S. dollar is worth about $1.50 Canadian.

"The goal is to take advantage of lower construction and (fuel) costs up here and increased demand down there,'' Hebert said, also noting tax advantages of building on tribal lands.

SynFuel is handling the financing for the project and several major U.S. and Canadian investors have committed to the project, Van Patten said.

"We're still looking for some investors,'' Hebert said, adding that about half of the money already is in place.

The only government money involved would be for power lines to remote First Nations communities. Indian and Northern Affairs Canada will provide up to $1 billion for that.