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SALEM

Proposed sale of power plant involves switch to natural gas

By Steven A. Rosenberg
Globe Staff / February 5, 2012
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While the deal to sell the Salem Harbor Power Station has not yet been completed, Salem Mayor Kim Driscoll likes what she’s hearing about the proposed plan to convert the coal-and-oil-fired power plant to a natural gas facility.

“We’re cautiously optimistic that it may lead to a redevelopment of that site,’’ said Driscoll.

Dominion, the Virginia-based energy company that owns the Salem power plant, confirmed last week that is negotiating to sell the site to New Jersey-based Footprint Power. Footprint has applied for a permit with ISO New England, the area’s electric grid operator, to connect to the electric grid in order to provide natural gas-generated electricity to the region in 2016.

Last year Dominion announced plans to close the Salem plant in June 2014. ISO New England spokeswoman Marcia Blomberg said Dominion is obligated to provide electricity to the power grid in New England “when needed’’ for the next two years. She did not rule out the plant closing earlier if Dominion were to apply for a waiver.

“If conditions changed and a reliability study were to show that the generator was no longer needed to ensure reliability, the generator would be permitted to leave the capacity market,’’ said Blomberg.

The announcement of the negotiations comes after months of speculation about the future of the plant, which has operated in Salem for more than 60 years. Dominion bought the plant seven years ago, and has slowly reduced production since then. Once a 745-megawatt power plant, it provided enough electricity to heat 750,000 Massachusetts and New Hampshire homes every year. But in December, the plant closed two of its generating units and reduced its overall power to 580 megawatts.

Driscoll and city consultants recently released a $200,000 state-funded study that looked at potential redevelopment of the 62-acre site. That study concluded that a natural gas energy plant could be refitted onto the property, and use just 10 acres. The study also recommended that the site would be best suited for commercial and industrial use.

The power station pays $4.75 million a year in taxes and is Salem’s largest taxpayer. In December, Dominion agreed to pay $1.75 million in taxes and host fees, while the remainder of the $4.75 million in tax revenue the city received from the plant last year will be made up by the state for the next four years. The state agreed to pick up the tab under legislation championed by state Representative John Keenan, a Democrat from Salem, and state Senator Fred Berry, a Peabody Democrat. The state money will come out of a regional fund energy companies paid into to offset greenhouse gases.

Driscoll said it is too early to project how much tax revenue a natural gas plant on the site would generate. She said she is optimistic about toxic materials and other pollutants being removed from the land. According to the recent site study, the cost to decontaminate the property could run as high as $75 million.

“It’s encouraging,’’ said Driscoll. “We’re worried about a padlock on that site, and certainly if it’s sold there will be an interested party that’s looking to repurpose it in a meaningful way.’’

Dominion spokesman Dan Genest and Footprint spokeswoman Carole Brennan declined to discuss a possible sale price or transaction timeline. In 2005, Dominion bought the Salem plant, along with power plants in Somerset and Providence, from USGen for $642 million.

Brennan said Footprint officials planned to meet with the 110 Dominion workers at the Salem power plant in the coming weeks.

“We’re well along in the due diligence process,’’ said Brennan. “Footprint plans to remediate and develop a new state-of-the-art, natural-gas-fired power plant on the Salem Harbor site.’’

Formed in 2009 by power industry executives, Footprint has yet to build or purchase a power plant. On its website, Footprint lauds the potential of natural gas power plants: “Typically, using natural gas instead of coal or oil will result in a 50 percent reduction in carbon emissions. This reduction can be enhanced even further by using highly efficient modern combined-cycle generating equipment.’’

For more than a decade, the Salem plant has consistently been the target of environmentalists who have criticized it for releasing toxic materials into the air. In 1998, it was included in the “filthy five’’ as one the state’s dirtiest power plants by Massachusetts Public Interest Research Group. Local activists also pointed to health risks outlined in a 2002 study conducted by Harvard University researchers. That study alleged the plant was responsible for 30 premature deaths, 400 emergency room visits, and 2,000 asthma attacks each year.

In 2003, then-governor Mitt Romney took his first major environmental stand when he came to Salem, demanding that the power company clean up its emissions and declaring “that plant kills people.’’

The plant has also been fined for safety violations. Also, in 2007, a steam explosion at the plant killed three workers.

Genest, the Dominion spokesman, said recent tough federal regulations to control pollution at power plants influenced the decision to close the plant.

“It did not make economic sense to invest the tens of millions of dollars that would be needed to install environmental controls with the new regulations,’’ he said.

Rick Robey, who has worked as an electrician at the power plant for 22 years and is a member of the Local 326 IBEW union, said a transition to natural gas could reduce the plant’s workforce.

“I do know that a combined-cycle gas generator does not utilize many people,’’ he said. “Nobody knows what their plans are.’’

Brennan, Footprint’s spokeswoman, declined to release technical details about the proposed natural gas plant.

Steven A. Rosenberg can be reached at srosenberg@ globe.com. Globe correspondent Justin Rice contributed to this article.

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