Government “Solutions” to Montana’s Energy Problems

One plausible explanation for the high natural gas and electric prices we are going to face this winter is that state governments have not acted fast enough to authorize the expansion of supply of various energy resources.

For instance, no new major coal-fired electric generator has been built in Montana since Colstrip 3 and 4 came on line in Eastern Montana in the early 1980s, 20 years ago, this despite the fact that Eastern Montana has huge coal resources. Not coincidentally, there has been no major expansion of the transmission system linking Montana with the west coast since the lines that allowed the export of the Colstrip power to Seattle and Los Angeles were constructed through Western Montana twenty years ago.

Critics of Montana’s energy policy can also point to the withdrawal of the Rocky Mountain Front from gas exploration and Montana has continued hesitance to authorize the widespread development of coal bed methane within the state despite the fact that such methane developments have reached epic proportions in Wyoming, Colorado, Utah, and New Mexico.

Montana obviously is a piker when it comes to energy development. Maybe that partially explains why the federal government through the new federal energy bill threatens to override state energy policy and dictate energy development not only in Montana but across the nation.

The fact that both our President and Vice-President made a lot of their money in oil and gas before ascending to their current lofty political positions certainly has nothing to do with these conservative, state-rights, Republicans pushing to override state policy on the siting of energy facilities, including the condemning of private property for energy company purposes.

It is important to recall that this is not the first or last “energy crisis” that Montana and the Nation have faced. Back in the late 1960s and early 1970s the federal government had industrial designs on Eastern Montana that would put Governor Schweitzer’s current schemes to shame. Coal gasification and liquefaction facilities along with dozens of coal-fired generators were going to litter Eastern Montana, bringing prosperity in their wake.

Of course, almost none of that crisis-driven development ever took place. Where it did, as in the industrialization of parts of Wyoming and Colorado, it all turned to bust, forcing hopeful communities through a violent yo-yo cycle that ended with them stranded in the down position.

Montana did not escape unscathed from that episode. Despite repeated rejections of the Colstrip 3 and 4 facilities by various Montana public bodies, those electric generators were built. The results were not great for either the state or the Montana Power Company, the managing partner of those facilities. When Colstrip 3 came on line and was ultimately accepted by the Montana Public Service Commission after bitter court battles, electric rates had to increase sharply to pay for the new facilities that generated electricity at close to six cents per kilowatt-hour, almost ten times the cost of the hydroelectric energy the state had previously relied on.

Rather than saving us from energy shortages and high-energy costs, these facilities forced electric prices dramatically upward because so little of the energy was actually needed and cost so much.

As it turned out, the construction of the Colstrip energy park was not a boon for the Montana Power Company either. The Montana Public Service Commission refused to impose the costs of both Colstrip 3 and 4 on Montana customers. Montana Power was left “holding the bag” for Colstrip 4 without any support from Montana customers. With no captive customers to be forced to pay for Colstrip 4, Montana Power hemorrhaged cash at a rate of $10 million a year and drifted towards bankruptcy in the mid-1980s until the City of Los Angeles took that excess electric power off Montana Power’s hands.

In the current “energy crisis” hysteria, we should not forget the costly mistakes that were made across the Pacific Northwest in our last “energy crisis.” The over-building of generating facilities led to many of those partially built facilities being abandoned, but customers were forced to pick up the costly tab nonetheless.

In the late 1990s and early 2000s, a new enthusiasm for building electric generating facilities hit the nation and region. This time it was for natural gas fueled generators. Many of those, too, were abandoned, including the Montana First Megawatts facility partially constructed in Great Falls. With skyrocketing natural gas prices, even many of the gas-fired facilities that actually got built may still become financial millstones.

The problem is that when “energy crises” strike, we act as if it does not matter what anything costs. Since energy is a “necessary” input for almost all other economic activity, we act as if must have access to it at almost any price. That is a costly anti-economic frame of mind that can do serious damage to our economy and to the environment.

Someone has to pay those costs. Federal preemption or lax state permitting simply issues a blank check to developers that they ultimately collect from every man, woman, and child in Montana. That drains purchasing power out of the state into the pockets of a few international energy corporations, leaving us all poorer.

When someone tells you that they have a plan to use state or federal government authority to boost energy production, hang on to your wallet. Out-of-state energy companies or their partners in South Africa are simply slobbering at the trough with a keen eye on that wallet of yours.