Generation for Generations i ii Generation for Generations A VISION FOR GIANT POWER The 50-year history of Basin Electric Power Cooperative By Stan Stelter Edited by Kathleen Ellisen Risch Designed by Ken Yetter Published by Basin Electric Power Cooperative Bismarck, ND www.basinelectric.com iii Published by Basin Electric Power Cooperative 1717 E. Interstate Ave. Bismarck, ND 58503-0564 Copyright © 2011 Basin Electric Power Cooperative All rights reserved. Published in 2011 Printed in the United States of America ISBN 978-0-9837940-0-4 iv Dedication To those many men and women who have made Basin Electric Power Cooperative a tremendous success for the benefit of its member-owners. v Contents Chapter 1 The whole family will be happy with electricity 1 Chapter 2 “Giant Power” becomes a reality 9 Neal Station: An early giant becomes a memory 11 Leland Olds: A visionary for giant power in America 15 Ken Holum: Advocate for public power and the co-op way 22 Chapter 3 A bunch of farmers grow a super G&T 31 Plant nurse willing to climb high steel 41 The Prairie is Our Garden 48 Chapter 4 Basin Electric faces the pains of growth 49 Postage-stamp rate faces legislative challenge 50 Black Mountain Village and the Missouri Basin Power Project 60 Prairie Hills Subdivision and the Antelope Valley Station 61 Art Jones: A quiet farmer who led by example 64 James L. Grahl: A giant among cooperators 68 Chapter 5 A painful transformation to a new Basin Electric era 73 Chapter 6 Synthetic fuels: A visionary decision to diversify 81 Bob McPhail: Selected to lead Basin’s transition 101 vi Contents Chapter 7 Basin Electric achieves a turnaround in the ’90s 105 Glenharold Mine: a legacy of coal 111 Chapter 8 A smooth transition into the new millennium 125 Chapter 9 Transitioning to an era of growth, construction 133 Chapter 10 Measured growth to meet energy needs in the Heartland 151 Dry Fork Station: A step to the apex of coal-fired technology or the end of an era? 157 Financial strength: key to cooperative viability 176 Ron Harper: A CEO steeped in the cooperative tradition 181 Chapter 11 Cooperative roots to serve Basin Electric for the future 185 Time line 195 Acknowledgments 203 Appendices 204 Index 221 vii Foreword Continuing the vision hen any business reaches 50 years in existence, there should be a tremendous Wcelebration. I think this is particularly important for a cooperative because of the member involvement and support required to guide and move the organization forward. A cooperative’s success reinforces the value of the business model. Although 50 years is a very short time in the grand scheme of things, the changes that have taken place at Basin Electric Power Cooperative in those 50 years and moreover the lifetimes of those people who founded it are remarkable. Some of those lifetimes take us back to the turn of the last century. Much of the rural areas of the Northern Great Plains only obtained central station electric service in the 1940s and 1950s. Those who lived without electricity for much of their lifetimes celebrated its arrival and were religiously devoted to advancing electric service to others because it improved their own lives so greatly. I think that is why those of us from the center of the country have a different viewpoint on energy than those on the coasts who have had electricity for several additional generations. While many of us may not Ron Harper, Basin Electric Power Cooperative CEO and general manager, from April 23, 2000 through 2011. have directly experienced gathering buffalo chips, hauling coal or cutting wood as the only means to heat our homes, we’ve certainly heard the stories from our parents or grandparents. Let’s not forget about the hauling of water, cutting ice from the lakes and rivers for the icebox, and doing chores and reading by kerosene lamp. viii Our Vision Statement Basin Electric will provide cost-effective wholesale energy along with products and services that support and unite rural America. When the barns and homes were wired and finally You’ll have to read the book to get the rest of the story. electrified, the demand for electricity grew rapidly Even 200-plus pages only scratches the surface in telling because electricity created much easier, cleaner and the story about the people who helped build Basin hopeful lives. Soon the electric cooperatives that were Electric into what it is today. initially formed to build the rural electric systems were I was recently listening to a news show and a gentleman looking for more capacity and that’s the very simple said, “After all, we are the authors of tomorrow’s story.” explanation of why Basin Electric exists. Let us take that to heart in hopes that we and those Leaders from the rural areas of the Northern Plains who who come after us stay innovative, committed to the founded Basin Electric used Leland Olds’ giant power environment, supportive of our greater community, and concept by pooling their power requirements to build a successful in supplying secure sources of energy. large generating station to achieve economy of scale and On behalf of all the members who have benefited from to serve as many in the region as possible. The plan was the vision of this organization, I thank those that carried to build a large generating station in the lignite fields of the water, made the tough decisions, and pushed forward North Dakota near the Missouri River, using the federal when outcomes were uncertain. Because of them, we transmission system and a postage stamp rate. and generations to come have a cooperative that has The founders required that the generating plants be withstood the test of time and is well positioned to meet built in a very environmentally friendly way. In fact, the challenges of the next 50 years and beyond. the Cooperative became the first utility in the nation to Let’s continue to pay it forward, require that surface-mined land be returned to rolling countryside. That requirement was written into Basin Electric’s first coal contract in 1962, long before rules Ron Harper and regulations on mined land reclamation were enacted. Basin Electric Power Cooperative, CEO and general manager Compared with burning coal or wood independently in June 15, 2011 homes, the technology used in modern power plants is a vast improvement. By the end of 2012, Basin Electric and its subsidiaries will have already invested more than $1.4 billion in various types of environmental controls on their facilities with annual expenses of $153 million. ix Preface ifty years ago, a decisive struggle arose in the development of electric cooperatives in the upper FGreat Plains. It was a struggle that would decide who would participate in the federal transmission grid and who would provide the supplemental power; the rural population of the region depended on both. The decisive moment came with the formation of Basin Electric Power Cooperative and the award by the Rural Electrification Administration of a loan to Basin Electric for the Leland Olds Station. At its core, these two decisions endorsed one concept: Leland Olds’ giant power. Under this concept, many cooperatives would aggregate their electricity requirements to build the largest power generating unit possible, thereby achieving economies of scale and serving the region using the federal transmission system. This concept was the essence of the formation of Basin Electric. Many believed that the Basin Electric plan was too ambitious: too much transmission and too much generation at too high of a cost. It took a good deal of persuasion to convince those involved that the large scope of this vision was worth the associated risks. According to James Grahl, Basin Electric’s first employee and general manager, proponents of the plan were called “communists and do-gooders.” However, the persistent vision that Basin Electric stood for—“a lot more than just a kilowatt-hour factory”—won the struggle in the end. In the decades since, striving to fulfill that original vision has been a persistent theme as each generation of leaders has taken on new challenges and succeeded. x It is that story of the cooperative approach—in good editor, and Kathi provided invaluable editorial guidance times and in hard—that is portrayed in the pages that for my work. Ken, the book’s designer, truly brought follow. I hope the stories told do justice to those who the history to life with his artistic touches and helped to make Basin Electric into one of the nation’s graphic arts skills. top generation and transmission cooperatives. Others who have given extra assistance throughout In my interviews, many in the rural electric program the gathering of material for this book, include: Terry have spoken about the value of cooperatives and Diekman, Daryl Hill, Jeff Nelson, Gary Williamson, expressed concern about their importance today. One Claire Olson, Bruce Carlson and Fletcher Poling. of those was Leroy Schecher, an original incorporator And finally I wish to especially acknowledge my of Basin Electric from South Dakota. Schecher thinks partner, Deborah Stelter, for her patience, reviews and cooperatives are more important today than ever. With suggestions, and Diane Zainhofsky, who generously the rural population shrinking, residents have to look allowed me time away from my regular job to finish out for themselves by adhering to the cooperative this book over these many months. philosophy. “I think that the cooperative movement, the cooperative way of doing business and people Thanks to all! working together, is something that has to continue,” he said.