Wolverine CEO Eric Baker: ‘Knew it was going to be a long race’

 

by Richard Lamb, Advance Editor

In nearly five years since negotiations began to find a site for the proposed power plant, the Wolverine Clean Energy Venture has made significant steps. Wolverine leaders explained that although time is not the friend of the organization, the company remains focused on the Rogers Township site for a power plant. ?Five years is a long time to be in the development cycle and obviously things ebb and flow in the world. The important things about what haven?t changed are what is keeping us in this fight,? said Eric Baker, president and chief executive officer of Wolverine.

That comment comes as the company awaits word from the Michigan Department of Natural Resources and the Environment (DNRE) on Wolverine?s major permit, the permit to install or also called the air quality permit. The state regulatory agency had promised a decision on the permit by the end of 2009, but as of today the DNRE has yet to say yes or no to the request filed by Wolverine in September, 2007. The wait has been costly for Wolverine, officials said Monday, but Wolverine has no plans of backing off.

?It seems remarkable how much time has been spent to get where we are today and how much we have yet to do,? Baker told a group of some 70 invited community leaders Monday at the Rogers City Senior and Convention Center. ?We knew it was going to be a long race, but we didn?t expect that we would be running the whole race with people hanging on to our legs as much as they are. But we will keep working through it.? HE DESCRIBED Wolverine leadership as a ?persistent and patient bunch? focused on doing the best for its member owners. A possible grant for some $150 million of stimulus funding might be left on the table, should a decision not be made by April 15. That is the deadline Wolverine has to apply for Phase II funding grant for construction on a carbon sequestration system for the proposed coal-fired power plant. Baker said that without the air quality permit from the state, it is likely there would be no $150 million grant.

Gov. Jennifer Granholm actually wrote a letter of recommendation on Wolverine?s behalf for the carbon sequestration grant, yet in the eyes of many she is holding up the DNRE?s granting of the air permit, In Monday?s lunch meeting, Baker said many things have changed since Wolverine first approached the owners of the Calcite quarry with the idea of building a power plant. But significant things have remained the same, he told the group. ?Our mission is to provide reliable and cost competitive, affordable power supply for our member owners. That?s it. It is a very old-fashioned and simple mission. It is not about profits, it is not about big coal,? Baker said.

?We believe that everyone in northern Michigan should be entitled to affordable energy. It is really an essential need that we all have. We are trying our level best to fulfill our mission. That is what (the Rogers Township power plant proposal) is all about, nothing more, nothing less. We just think it is a really good site.? FINANCIALLY, BAKER said the Michigan economy and the national economy is on hard times. Those opposed to power plants have used that to say that power plants are not needed. ?We believe this is dangerous rhetoric and very short-sighted. When the economy does recover, we need to have these new projects and new generating plants ready to go just like we did in the 1980s. We don?t have that today,? Baker said. Wolverine is concerned with interest rates and how they affect the plant?s ability to borrow money. He estimated that interest rates might go up from the historical lows now experienced.

The new administration and new Congress with its ?fervor and crusading mentality that we are going to change the world and this is our opportunity to do that,? Baker said is a factor in the big picture. He expects the current cap and trade legislation as proposed at the federal level is ?dead on arrival? but that the Environmental Protection Agency (EPA) will take a stronger role in regulating carbon emissions and the energy industry in general. ?This is going to create a lot of changes that is going to affect a lot of businesses, not just the energy business,? he said. He called the role of the Michigan Public Service Commission (MPSC) ?a nuisance.? The MPSC issued a staff opinion last fall, after the governor called for a needs analysis last February, that said the Rogers City power plant was not needed, a view strongly opposed by Wolverine.

?Whether this opinion is legally binding, we do not know. It has not been tested. Whether it is a legal part of this process, we do not know. It has not been tested. Nonetheless, it has consumed a significant amount of resources of our company?it took several hundreds of thousands of dollars to generate that report?and it has created another 12 months of delay in the process,? Baker said. AT THE SAME time, significant things have not changed, Baker said, first among that list the company?s commitment to Rogers City and the belief that the site in the Calcite quarry is the best place for a new power plant in the state. ?As evidence of that, just two weeks ago the Wolverine board of directors passed a continuation of the development budget for Rogers City and has funded staff for the continuation of this pursuit,? Baker told the group.

The reasons why the Rogers Township site was selected have not changed, Baker said. ?This is a great site to build a power plant. There is tremendous opportunity. There are tremendous grid benefits in terms of the electric grid reliability for all of northern Michigan, including the eastern Upper Peninsula. That is the fact of the matter,? Baker explained. ?Generation in any location is good. Generation at this location is great, and that won?t change.?

Financially, Wolverine is stronger than ever, Baker said, and money has never been more available to Wolverine. ?The variety of sources for money has never been better for Wolverine,? the CEO explained. A loan completed in December had the lowest interest rates the company had seen ?for close to 30 years, maybe 35 years.? Another constant is the need for base load generation, as a major contract will run out beginning in 2012. ?Our need for base load generation is absolute, and factual, no matter what the MPSC staff report says,? he said. Sales have not eroded in the bad economy, Baker said. In January the company hit a new all-time peak, evidence that demand remains high. ?The electric demand is still out there and it is not going away,? Baker said. ALSO NOT GOING away is Wolverine?s commitment to biomass and wind energy research and utilization.

Baker said the last thing that hasn?t changed is the support from Carmeuse and the community. ?Your letters mean a lot to us as does your words of support,? Baker told the group. Baker said the DNRE could do three things on the air permit application, grant it, not grant it or simply not render a decision at all. Although the governor denied trying to influence the decision of the DNRE (as reported in last week?s Advance) there are those who say politics is everything in the process (see related story). Baker said Wolverine is guided by simple principles.

?Even when we thought we were making progress on the air permit, Wolverine continued to look for other alternatives. So when we have an alternative that we think is within our control, is cost competitive and in our members? best long-term interest, we will move forward. And whether that is Rogers City or whether that is some other alternative, we are always looking for that opportunity,? Baker said. ?What we have been trying to do with Rogers City is to try to get it within our control to make that decision. Without that permit, it is not within our grasp to make that decision.? THE COMPANY HAS put on, what Ken Bradstreet, director of communications and government affairs for Wolverine, characterized as a full-court press, enlisting the assistance of former Attorney General Frank Kelley and others to talk to Gov. Granholm in hopes of persuading her. Representatives from Dow Chemical, partnering with Wolverine on carbon sequestration, also lobbied the governor. Various county and city groups have sent letters of support to the governor.

Unlike the landfill permit or the harbor permit, there is no time limit for the DNRE to issue a permit within any time frame, Bradstreet said. ?There is no statutory obligation for them to issue a decision anytime soon or perhaps ever. The law does not compel them to do that. The governor is very conflicted. Because she has a lot of friends in the environmental community she doesn?t want to issue a permit to build a plant and I think she doesn?t really want to issue a denial,? Bradstreet said.

?So we are not sure she will issue us anything. We will have to wait and see.? So while time passes, Wolver

ine is always on the lookout for best ways to serve its customers. ?To the extent that if another alternative comes up that is superior to Rogers City on all other things combined, we would do that even if we had a permit with Rogers City. That seems like common sense to me. The amount that we have invested to get this project is an enormous sum of money, $20 million is a lot of money. But our power supply budget is close to $250 million per year, so in the context of 10 years worth of power supply or 30 years worth of power supply, which is what this project would be, it is a good investment for us,? Baker said.

WAITING FOR something to happen is not an alternative for Wolverine, Baker said. Although they are waiting for the state to decide on the air quality permit, discussions go on everyday, Baker said, in planning for the future. If that means it is in the best interest of the company to wait until after the 2010 gubernatorial election, so be it. ?We will stay in the Rogers City project until or unless we feel there is a fatal flaw in the project idea or there is an alternative that says there is no reason to build it or the market changes so significantly that there is no strategic value in Rogers City. In my wildest imagination I can?t figure out what that outcome would be in this market. There are too many positive things about this community and that site and we would very much like to do something in this community,? Baker said.

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