In corporate welfare gone wrong, the end never comes

The storage facility in New Hope currently listed as the headquarters for Excelsior Energy. (PHOTO: Google Street View)

After 17 years of failure and false hope, you’d think Excelsior Energy would just go away. But the largest Iron Range economic development failure in history isn’t done rubbing our noses in the grift.

First, some background.

Starting in the early 2000s through the end of that decade Excelsior Energy proposed building a coal gasification power plant on the Iron Range, eventually identifying a site near Taconite in Itasca County. The company, mostly a collection of energy industry lobbyists and lawyers, some of whom had deep Iron Range roots, called it the Mesaba Energy Project. 

Excelsior Energy parlayed loopholes, insider connections, and legal maneuvers to advance a long shot private enterprise on the public dime. The local pols and editorialists were agog. The LTV mine in Hoyt Lakes had just closed and folks were desperate. Though the idea first gained support within Iron Range DFL circles the Mesaba Project would eventually envelop members of both parties, with campaign checks and lobbying efforts spanning the partisan divide.

And despite the company’s total failure to deliver on any promises in 17 years, Excelsior Energy somehow still lives. Company leaders Tom Micheletti and Julie Jorgensen remain fixtures at Iron Range political fundraisers, donating to candidates just last year.

It began with two Iron Range Resources and Rehabilitation loans in 2001 and 2003 totaling $9.5 million. Excelsior’s spending of those loan funds lacked proper transparency according to the Office of the Legislative Auditor. But we know that dozens of Excelsior lobbyists registered soon after, eventually netting more than $41 million in total federal and state grants according to media investigations in 2011. In fact, company principals may have done all this with just $60,000 of their own money in the mix. Again, because of a lack of transparency we just don’t know.

Obviously there is no coal gasification plant in Itasca County. That technology was indeed failing across the industry, as was evident to anyone with access to Google when all this was going on. A half-hearted attempt to convert the project to natural gas generation went nowhere.

It was a boondoggle. Some folks had an idea. They had friends in high places. They got to play with house money for a number of years. But even though boondoggle status now stands as incontrovertible fact, we are not yet done with this story.

For one thing, the Department of Iron Range Resources will be faced with a pickle this year when the original loans finally come due. In 2013, the agency extended the loans until 2019, even removing the requirement that Excelsior pay interest on those loans until then.

Theoretically, the IRRRB would be entitled to collect interest from Excelsior this summer, or else take the permits, land and assets as collateral on the loans. But there won’t be much to take, as I’ll explain soon.

I mentioned the fact that Excelsior’s loan would come due in 2019 a couple weeks ago in a column about the sunk costs fallacy. I heard from a few folks about this afterward, including Charlotte Neigh, who led the citizen group to stop the project, and Carol Overland, a Minnesota attorney who represented them. From them, I learned something new.

Excelsior managed to get yet another reprieve from their impending doom in the waning days of the 2017 legislative session in a gambit that escaped view of even longtime critics like me. Somehow, during the conference committee on one of those massive omnibus bills, legislators inserted language protecting “Innovative Energy Projects.” That’s the specific language concocted by Excelsior Energy to mandate large utilities to purchase power from them. (That effort failed because Xcel and Minnesota Power successfully lobbied to kill the idea at the Public Utilities Commission).

Yet, even though there’s nothing innovative about what remains of Excelsior Energy (nor is there so much as an electron of energy anywhere to be found) the zombie rhetoric was used to allow Excelsior to keep its land and permits until 2025. All thanks to a provision buried so deep in that bill that *no one else noticed until now.*

Perhaps the IRRRB could go after Excelsior’s other holdings, but they would be disappointed there, too. Excelsior sold their headquarters years ago, and Micheletti and Jorgensen are actively selling their home right now. Overland dug all this up on her blog last month

In fact, the official corporate headquarters for Excelsior Energy is now a storage unit in New Hope. 

Now, I grant you, it looks like kind of a ritzy storage facility, one that caters to people who own fleets of classic cars. But it’s still a storage unit.

Furthermore, Jorgensen has spent the last several years trying to get a solar energy company going. Four different LLCs related to those efforts also call the same storage unit home. In other words, the original boondoggle bore children.

The larger point is that when the Department of Iron Range Resources acts on this issue they will likely have nothing to seize, and will be legally prevented from taking the land or permits back until 2025. So, most likely, some new nonsense will be proposed so that everyone can save face. Or, perhaps, it will just fade into the mists like Brigadoon.

I’m not here to extract blood or stomp my feet. I said my piece on this long ago, and really just want a new generation of Iron Range leadership to learn from this massive failure.

The truth is that if this project wasn’t proposed, another one would have been. If these people hadn’t proposed it, and had their political allies not championed them, others would have. The use of public funds to aid the whims of the well-connected is an old tradition, one we can’t excise by wishing.

The grift will go on so long as we allow it.

We can, however, say no. We can hold all projects to unified merit-based standards based on cost analysis. Elected and appointed leaders can do public business in the light of day. We can hold public officials and people who do business with the public accountable for their promises. We can verify claims.

The “Mesaba Energy Project” ends not with a bang but locked up in a storage unit in New Hope. We now see the many ways it failed and how the people were duped every step of the way. We must start fresh. At the very least, we could *stop helping* companies like this avoid accountability for the money they took and the false hopes they raised.


Comments

  1. A good summary of the scam as I understand it. I think more credit might be given to the organized citizens who fought this government-funded scam at their own expense–“CAMP” (Citizens Against the Mesaba Project) and doubtless others. And the continued running of the Tom and Julie Show is surely a sad testimony to an essential lack of integrity in Minnesota politics–reflecting shamefully on both parties.

  2. This project seemed to have scam written all over it right from the start. If things seem too good to be true they usually are.

    Back then there seemed to be a mega project that would come along just in time to get people worked up just before elections. After the election it would blow up after consuming several million dollars of IRRRB money.
    Almost like it was done on purpose. Remember Endotronics, the chopsticks plant, among others? Mesaba Energy was merely the largest of these with the least to show for it.

  3. http://D.Swanson says

    Desperation provokes all of these scams. Lets face it pouring more money into the Iron Range isn’t going to create the lifestyle people had there 50 years ago. Spending millions to provide jobs for less than a hundred people makes no economic sense. Take the money and buy up the property of these needy jobless, ship them out of town with their pockets full and bulldoze the houses with the promise they will never return. It’s over people, move on.

  4. Hadn’t thought about this for some time but it always seemed like a giant scam with public money moved around to match other public money so it looked like there was a sound financial base. It seems that politicians are always so desperate to promote jobs that they ignore the real cost of those proposed jobs which disappear as the project continues. I remember when Excelsior tried to get the legislature to force Excel to purchase the power to prove there was a need for continued support of the company. Would have been a creative way to have Excel stockholders and ratepayers pay for the failing scam. I seem to recall reading that despite the huge debt owed by Excelsior-far more than any property was worth-if the property was sold, the company would still get half of the proceeds. Story still makes me angry at the greed and foolishness.

  5. http://steve%20baker says

    Thanks for the coverage, but those of us who lived through the IRRRB’s squandering of the Constitutionally created 2002 Fund during the 1980’s on chopstick factories, cancer-curing machines (Endotronics), “Disneyland of the North” (a Gov Perpich quote), trying to feed aspen to cows and countless other long-swept-under-the-rug projects that benefitted only fly-by-night shysters and local DFL cronies are hardly surprised.

  6. http://Ranger47 says

    All promoted, supported and approved under decades of DFL controlled IRRRB…and we keep on electing more. Insane. All faux rage because we’re the ones at fault.

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