In mid-1996, Minnesota Valley Alfalfa Producers (MnVAP) took the first step toward turning the dream of an alfalfa-powered electrical plant into a reality by buying Midwest Alfalfa, Inc., Priam, MN. The Priam facility was to be the first of a half-dozen satellite plants where MnVAP shareholders would deliver alfalfa.

At these plants, leaves and stems were to be separated. Leaves would be processed into a high-value 25-30% protein alfalfa leaf meal. Stems would be transported to a planned electrical plant near Granite Falls. There they would be gasified and turned into electricity for Northern States Power Co. (NSP).

Dick Jepson, MnVAP's board chairman at the time, saw the purchase as a good opportunity.

"We bought it for considerably less than it would have cost to construct a plant," he says. "And because it was a turn-key operation, it gave us a way to get into business and start generating income."

While news of MnVAP's ambitious plans generated excitement in most sectors, some existing alfalfa processors in other states were less than enthusiastic. They claimed that grant money from the U.S. Department of Energy (DOE) for the power project represented an unfair subsidy and mounted an extensive lobbying effort to have the funding pulled. MnVAP officials point out that detailed DOE audits ensured that funds for the energy project remained separate from day-to-day operations of the Priam plant.

Shortly after MnVAP bought the plant, NSP named the co-op the winner of a competitive bidding process to supply 75 megawatts of biomass power. The next step was securing a power purchase agreement with the utility.

Over the next year and a half, MnVAP's board wrestled with a seemingly endless string of details - negotiating the contract, designing and testing equipment for gasification and leaf separation, hammering out legal guarantees with vendors and developing markets for alfalfa leaf meal.

"I never dreamed you could get into anything involving this much detail," Jepson says.

In late 1997, MnVAP and NSP reached agreement on a contract calling for MnVAP to deliver a continuous supply of biomass electricity to NSP for 12 years. Getting final approval of the contract from the Minnesota Public Utilities Commission (PUC) took another 14 months.

By many accounts, those long delays played a major role in sinking the project. By one theory, the protracted contract negotiations with NSP drove up the project's costs to investors and exhausted the co-op's resources.

Others claim that PUC's delay in approving the contract eventually led Enron (a large natural gas company that had signed on as a co-developer in 1998) to pull out of the project in early 1999. Shortly afterward, DOE froze its funding for the project - potentially worth around $44 million. That dramatically hindered the co-op's ability to line up needed investors and effectively put an end to the project.

In December 1999, a few weeks after NSP announced it had terminated its power supply contract with MnVAP, co-op officials announced that they were abandoning the electricity-from-alfalfa project. Minnesota Congressman Dave Minge quickly called for an investigation.

In a letter to PUC, Minge pointed out that MnVAP's 400 shareholders had invested $6 million and that the Department of Energy had devoted $12 million to the project.

While pointing out that many factors likely contributed to the project's collapse, Minge questioned whether NSP had negotiated "in good faith" and whether the state's own regulatory structure had "contributed to the failure."

"Why did such a promising venture never get off the ground?" Minge asked in the letter. "Who answers to the farmers who lost so much money, resources that few could afford to lose?"