O’Leary Wins Praise Amid Critical Views

MINNEAPOLIS —  The day after President-elect Bill Clinton picked Hazel O’Leary as energy secretary, she was back in her fifth-floor office at a utility company talking with Kris Sanda, Minnesota’s public service commissioner.

“I told Hazel that she really deserves the job,” recalled Sanda, a Republican who has sometimes differed with O’Leary. “She said: ‘Kris, you’re the only one who has said that to me so far.’ ”

As O’Leary realized, her nomination last week caught many people off guard. It came as a surprise not only because the job once had been promised to outgoing Sen. Timothy E. Wirth (D-Colo.) but also because O’Leary’s record on energy matters is not long, and it is of concern to environmentalists, many of whom expected an appointee who would clearly advance Clinton’s pledge to overhaul energy policy and promote alternatives to oil and nuclear power.

“She’s really kind of a mystery to us, but this appointment seems to be pretty much business as usual,” said Paul Hansen, director of the Midwest office of the Izaak Walton League, an environmental organization.

Those who have worked with O’Leary said that she will bring to the job open-mindedness, keen intellect, sure judgment and experience both as a regulator and as someone who has been regulated.

“She promises to be one of the most surprising people in the Cabinet,” said Robert W. Craig, president of the Keystone Center, a Colorado think-tank specializing in energy and environmental issues, where O’Leary has served on the board since 1987. “She is very candid, very honest, very loyal and a quick study.”

O’Leary, 55, a lawyer who served in mid-level energy posts in the Gerald R. Ford and Jimmy Carter administrations in the 1970s, will have to be a quick study when she takes over one of the largest and most troubled bureaucracies in the federal government.

Many in the energy world view the choice of O’Leary, executive vice president of Northern States Power Co., as a product not so much of her ample qualifications as of the demands by women’s groups that Clinton keep his pledge to increase women’s representation at top levels in his Administration.

Clinton essentially acknowledged that pressure to appoint more women was a factor in selecting O’Leary, who is much less well known than Wirth and came to Clinton’s attention just a week before her selection.

Hints of her positions on critical issues, such as energy conservation and the handling of nuclear waste, are found in her record over the last three years at Northern States Power, Minnesota’s largest utility.

O’Leary came to Northern States in 1989 as senior vice president in charge of corporate affairs, a post from which she also plays an important strategy role within the company on sensitive issues. For the previous eight years, she had worked in New Jersey as a consultant to energy-related firms.

The Minneapolis job made her the utility’s public persona on such thorny issues as plans to expand the storage of spent nuclear fuel near an Indian reservation and an attempt to burn PCBs, a class of cancer-causing chemicals used in the past as insulation in electrical transformers.

Northern States ran into a buzz saw of opposition to its plan to store more radioactive waste at its nuclear power plant on Prairie Island, about 50 miles southeast of Minneapolis on the Mississippi River.

The controversy illustrates perhaps the most volatile problem O’Leary will face in her new post: disposal of the rising inventory of spent nuclear fuel from power plants around the country.

Despite a congressional mandate, the energy department has not come up with a permanent repository for radioactive wastes, so utility companies are forced to store it at dozens of plants around the country, stirring public alarm.

At Prairie Island, storage space was running out and Northern States sought permission in 1990 to build new facilities. The loudest objections came from the Mdewakanton Sioux Indians, who have a 600-acre reservation adjoining the plant.

“Our main concern is that this will become permanent storage and this small group of Indians will be forced to live with it for generations,” said William J. Hardacker, a lawyer for the tribe.

For the utility, failure to win a permit to increase storage threatened to close the plant, whose two reactors provide roughly 20% of its total electrical generating capacity. O’Leary emerged as the utility’s public spokeswoman on the issue, stressing the safety and temporary nature of the proposed facility.

She also defended the utility’s plan in testimony before a Senate committee in Washington last March--and cast the problem in a broader light that indicates she is likely to make a federal storage facility a priority.

“If the waste issue is not resolved, there will be no new investment in nuclear power under the present circumstances,” O’Leary said.

She chastised the Energy Department for its failure to create a safe facility for nuclear waste and warned that failure to resolve the issue risks the future of an industry that provides one-fifth of the nation’s electric power.

Similar sentiments were expressed in O’Leary’s testimony two years earlier before state regulators: “The Department of Energy has not moved quickly enough to solve the nation’s nuclear waste disposal problem.”

Northern States Chairman James Howard said O’Leary helped the utility’s other executives understand public concerns in the waste controversy and helped formulate ways of addressing them.

“She was very clear and very reasoned in her approach to the spent-fuel issue,” said Howard. “She listens well, but you always know where Hazel stands.”

After an administrative law judge ruled that Minnesota law prohibited the storage of more waste at Prairie Island, it was O’Leary who helped craft a behind-the-scenes compromise to avoid shutting down the reactors, according to Sanda, the public service commissioner.

As a result, Northern States received the OK from regulators in June to store 287 tons of additional radioactive waste on the sprawling island. It was about a third of the capacity sought by the utility but enough to carry it into the next century. The Sioux, however, have appealed the decision in court.

While the storage furor was raging, O’Leary also played a prominent role in an attempt to burn PCB-contaminated oil at a plant in Granite Falls, a town of 3,000 about 140 miles west of Minneapolis.

O’Leary helped Northern States obtain a permit to burn the toxins and led the effort to convince residents that the burning would not lead to environmental or health problems. Last year, however, the utility gave up the plan in the face of the community’s intransigence.

“If she works as hard for the nation as she did for the utility, she’ll do a good job,” said Roy Lenzen, the mayor of Granite Falls, who opposed the burning.

O’Leary has been a staunch defender of Northern States’ environmental and conservation record, although that record has not always earned high marks from environmentalists or regulators.

“I’m proud to state categorically that no utility in the nation has a better environmental record,” she said in testimony when the utility sought a rate increase in 1990.

George Crocker, a Minneapolis environmental activist, said that Northern States’ performance on conservation and promoting alternatives to coal and nuclear power has been overblown by the firm.

“It’s an intricate illusion,” says Crocker.

When O’Leary’s selection was announced last Monday in Little Rock, Ark., Clinton praised her efforts to promote conservation and alternate energy sources, such as wind.

The utility, which generates most of its power from coal and two nuclear plants, has boasted that its program to generate electricity from wind turbines will place it second to California in the use of wind power. However, environmental groups argue that Northern States acted only under pressure from regulators and critics and still has not made a sincere effort to tap Minnesota’s winds, which are far stronger than those in California.

But O’Leary sounded a strong sentiment for conservation and alternatives to imported oil at the press conference in Little Rock, saying: “I stand before you having been 20 years in this business to tell you we’re no better off in terms of stepping back from that foreign barrel of oil than we were almost in 1974. That’s unconscionable for this nation, and it’s also unconscionable for those who have attempted to set the policy.”