Big Stone II

March 26, 2007

Response to CURE Action Alert

The Montevideo-based group known as CURE, which stands for Clean Up the River Environment, issued an action alert in March asking its members to contact the CEOs and board chairs of three of the seven Big Stone II companies—Otter Tail Power Company, Great River Energy, and Missouri River Energy—to demand response to six allegations related to water, air, global warming, coal transportation, conservation, and company image. The alert also included a "note" to clip out and enclose with utility bill payments.

Here are our responses to CURE's charges.

Regarding water

The Big Stone II project participants followed the requirements of the South Dakota water permit process. The South Dakota Water Management Board granted the permit because the Big Stone II project demonstrated the following:

• Unappropriated water is available.
• The project does not harm anyone else's existing water rights.
• The requested appropriation is a beneficial use of water.
• The requested appropriation is in the public interest.
  

CURE's claim that Minnesota officials' concerns were not heard is not true.

• The South Dakota Department of Environment and Natural Resources and the Minnesota Department of Natural Resources discussed Big Stone II's proposed South Dakota Water Appropriations Permit on May 23, 2006. The Minnesota DNR concerns were discussed at that time.
• The Minnesota DNR provided written comments on the proposed Big Stone II Water Appropriations permit to the South Dakota Water Management Board in their letter dated June 30, 2006.
• Those comments were considered and addressed during the July 12, 2006, public hearing before the South Dakota Water Management Board.
• The Minnesota DNR chose not to participate in the public hearing even though they had the opportunity to do so.

Regarding air quality and mercury emissions

CURE doesn't distinguish between methylmercury and elemental mercury. The health issues CURE relates to mercury from Big Stone Plant actually are caused by organic methylmercury accumulating in the fatty tissue of fish. In general, the majority of mercury released from power plants is in the elemental form. Elemental mercury isn't very water soluble and, consequently, when it's released into the global mercury cycle it isn't easily converted to methylmercury.

You may be surprised to learn that:

• Mercury is a naturally occurring element. About 55 percent of all mercury emissions in the world are released into the environment through natural processes, such as natural leeching from runoff, forest fires, and volcanic activity.
• Electric power plants in the United States account for only about 1 percent of total global mercury emissions.
• In the United States mercury emissions have dropped significantly since the mid-seventies. Between 1990 and 1996 alone, human-released sources decreased by 40 percent.
• Big Stone Plant began operating in 1975.

The Big Stone II project participants and the electric utility industry continue to support ongoing research to clarify mercury-related issues and protect human health and the environment.

Regarding climate change or global warming

Each of the Big Stone II participants is committed to reducing greenhouse gas emissions at their companies. In addition, the Big Stone II project will:

• Use a super critical pulverized coal boiler technology that will emit 20 percent less carbon dioxide than a comparable coal fired power plant.
• Include oversized transmission facilities that—when combined with other planned transmission projects—accommodate 800 to1,000 additional megawatts of new electric generation, potentially from wind energy that would offset additional fossil-fuel generation.
• Include individual participants' renewable energy additions of about 950 megawatts.
• Produce fly ash suitable for use as a replacement for cement in concrete mixtures. Each ton of fly ash used in place of cement reduces carbon dioxide emissions by at least a ton.

Concerning possible carbon taxes and carbon offsets:

• Even adding the magnitude of carbon taxes being discussed in Congress, Big Stone II is still the participants' least-cost option for baseload generation.
• Our customers will need Big Stone II by 2012, when it is scheduled to go on-line. We cannot wait for a mature carbon offset marketplace to develop.
• A carbon-offset marketplace must be national or global in order to be cost effective. That will take time.

Regarding the cost of coal transportation

CURE's action alert made a wide array of claims about the cost of coal transportation that were not related to the Big Stone II project or were simply not true. Here are the facts:

• Big Stone II participants never were intending to have the DM&E haul coal to the plant.
• The federal issue to which CURE referred was a rate dispute. From the beginning, the participants' analysis of Big Stone II never assumed a lower rate. If Big Stone Plant is successful in its challenge of the rates, however, it could make the Big Stone II project even more attractive economically than under current assumptions.
• The rail delivery problems to the Big Stone site have been completely resolved. We have no concerns about rail delivery.
• Minnesota communities are best supported when electricity prices remain low and stable. Big Stone II does that. Without Big Stone II, our customers will be spending more energy dollars.

Regarding efficiency and conservation

The Big Stone II participants agree that energy efficiency and conservation play an important role in meeting customer energy needs.

• The participants have been actively promoting energy efficiency and conservation with customers since the 1990s.
• The energy efficiency and conservation programs of the utilities serving Minnesota have been regularly reviewed, and commented on, by the Minnesota Department of Commerce.
• The participating utilities remain committed to pursuing all cost-effective energy efficiency and conservation programs that benefit customers.
• Energy forecasts show that even with aggressive efficiency and conservation efforts our region needs affordable, baseload electricity by 2012 to ensure the reliable electric supply that customers expect.

Pride in the project

The participating Big Stone II utilities take a great deal of pride in being part of the project. Our reputations as reliable, competitively priced electric service providers will remain intact because of these positive attributes:

• Surveys of electrical customers continually indicate that reliable electric supply is what they want first and foremost from their electric utility—investor-owned, cooperative, or municipal. Big Stone II will deliver reliable electricity to about 2.3 million people.
• Surveys indicate that affordable electricity ranks a close second to reliability. Big Stone II is the least-cost option for the seven participating utilities.
• Big Stone II will allow total emissions of sulfur dioxide, mercury, and nitrogen compounds to be reduced from the Big Stone site.
• Community members and leaders in the Big Stone site area favor the new plant.
• Big Stone II will create 1,200 to 1,400 jobs during the peak of construction and 40 permanent jobs at the plant and help ensure the region's economic stability.

Conclusion

The utilities participating in the Big Stone II project are committed to balancing our generation resources and conservation efforts so that we continue to provide reliable and economical electricity to our customers in an environmentally responsible manner. For some of us this is a regulatory requirement. For all of us, it is how we do business.

The Big Stone II project participants carefully studied hundreds of water, fuel supply, and emissions options for the project as well as conservation and other generation resource alternatives to Big Stone II. We selected this project as the best solution to meet our customers' growing need for electricity.

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