A good portion of the mainstream still refuses to acknowledge the disconnect between Gov. Schweitzer's pro-energy rhetoric and the behind-the-scenes anti-development actions being taken by his administration.  As a reminder, this is the same administration that last two year promulgated some of the strictest emission standards in the country; killed HB 610 , which would have made it easier to build new power plants in Montana; and implemented new mandates for the state electricity portfolio that have driven up the price of electricity.

And now the Schweitzer administration's Board of Environmental Review is making overtures that they will implement new emission standards on CO2 - and do it without legislative approval.  The Billings Gazette reported on 1/12, "Board  (of Environmental Review) members said they may have the authority to create new CO2 regulations for the state, but that the law doesn't allow the state to impose them retroactively on this plant at this time."

With all the Schweitzer anti-development roadblocks that are already in place, and additional ones on the horizon, it's no wonder that Wyoming, North Dakota, and South Dakota are all seeing more energy development than Montana. 

People have been decrying Schweitzer's big talk, no action on energy for most of his administration - but that's not entirely accurate.  Schweitzer is taking action on energy development - it's just that it's all negative action designed to put up new roadblocks to development.

Montana's greatest asset is the enormous energy reserves we have in our state, and in particular coal.  But while our neighboring states are cashing in on cutting-edge coal development technologies (like gasification, liquefaction, and cleaner-burning power plants), Montana is getting left behind due to the short-sighted policies of Governor Schweitzer.
 

It's another chapter in the sad chronicle of Montana losing out on energy development.  Last week the Bismarck Tribune reported that Great Northern Power Development will build a coal gasification plant near South Heart, North Dakota.  The project is expected to bring 200 new jobs.  South Heart is just 50 miles from the Monana border.

Meanwhile Montana has not a single coal gasification or liquefaction project on the drawing board.  Keep on talking, Governor Schweitzer.

We stumbled across this interesting study from Basin Electric Power Coop on the Wyoming Taxpayer's Association web site.  To sum it up, Montana is second to last in our region for providing property tax incentives for wind generation, providing a 50% rate reduction over the life of the project.  Compare that with an 85% reduction in North Dakota and a 70% reduction in South Dakota.  We also lag behind the Dakotas in incentives for coal-fired generation.

Admittedly, Basin Electric's comparison is a bit cursory.  It doesn't take into account the total tax structure for these states.  For instance, in addition to property taxes in Montana, coal-fired generation must also take into accounth the Coal Severance Tax.  However, this just reinforces the point made in our article from yesterday that while Montana talks big about energy development, our neighboring states are actually doing something to make it to happen.

ConocoPhillips and Peabody Energy (the world's largest coal company) announced this week they will collaborate on a "major commercial scale coal to gas facility" in Kentucky.  The Kentucky project is projected to provide 500 high wage jobs.

What's most interesting about their joint press release was this quote from Peabody President Rick Bowen: "We appreciate the effort by Kentucky's elected officials and regulatory bodies in pulling together the balanced legislation and follow on agreements to attract investments and help us with this important decision."

During the last legislative session, legislative Democrats opposed legislation that would have made Montana more attractive to coal development, like HB 610, sponsored by Democrat Rep. Jim Keane, which would have reduced the number of lawsuits stemming from the siting process - HB 610 died on a party-line vote in the Senate with all but one Democrat voting against it.

So as other states are making strides at working with energy developers, Montana persists in talking big and getting zero results.  Yet to hear Gov. Schweitzer talk, he's the nation's biggest promoter of this type of clean coal technology.  When are we going to see something happen?  The answer is never as long as this guy's in office.

The Montana Public Service Commission (PSC) is considering a rule change regarding electricity that the utilities must buy from small producers (primarily wind) that will lead to more expensive electricity for Montana consumers.  Without getting too far into the complexities, Montana has a law on the books based after the federal PURPA legislation that requires utilities (i.e. NorthWestern Energy) to purchase up to 3 mW from small producers called "qualifying facilities."  The rule change would increase that cap up to 10 mW to accommodate for larger wind projects.

Why is this a problem? Because NorthWestern's electricity supply is becoming increasingly unstable as they are backed into more and more wind generation.  You see, wind-generated electricity fluctuates wildly from hour to hour (and even minute to minute) which forces the utility to buy increasing amounts of extra power to make up for the difference. 

Look at it this way, if all that wind energy wasn't included in the portfolio, the utility would not need to buy the extra, backup power.  In essence, the utility is having to buy twice for power that is only used by the consumer once.  According to a document obtained from the PSC, since 2002 NorthWestern has increased by more than $10 million per year the amount of backup power it needs to accommodate the extra wind energy in its system, or 72%. These are costs that are recovered (by law) from the electricity consumer.  (And here we've been taught that only deregulation increases electricity costs!)

And the numbers included in the document do not anticipate the extra power that will come into the system if the qualifying facilities cap is increased to 10 mW.

What's really going on here is a concerted effort to help small wind energy producers get rich quick on the backs of Montana consumers.  Remember, these qualifying facilities do not sign contracts with utilities, they simply supply their power and get paid the top rate.

We do need to make alternative energies like wind power more viable to help reduce our dependence on non-renewable energy, but consumers also have the right to the cheapest available power.  In a previous post we discussed how wind power is subsidised, but that's just one of the hidden costs of wind energy.  The qualifying facilities boondoggle is yet another example.

Though Montana is losing out in the cutting edge technologies of alternative energy (i.e. coal liquefaction and gasification, and clean coal-fired generation), we are making some progress in wind-generated electricity. The Cut Bank Pioneer Press reported last week that progress is being made on the McCormick Ranch wind project north of Great Falls.  This is great news from the area as they stand to reap benefits of new jobs and an improved tax base.  However, there's one small problem; this project is currently slated to send all of it's generation to Alberta through a to-be-constructed transmission line from Great Falls to Lethbridge.

As it stands, wind generation is only economically viable due to heavy subsidies from the federal government in the form of the Production Tax Credit, which chips in $18 for every Mega Watt hour (mWh) produced.

Assuming a typical efficiency factor of 37% on the 300 mW the McCormick wind farm is currently projected to produce, the Production Tax Credit will pay out subsidies of about $175 million over the next ten years.  In sum, that's $175 million that American taxpayers are going to shell out so Canadian consumers can get wind power at a competitive rate.

Senator Baucus has been instrumental in extending the Production Tax Credit through the Senate, and we applaud his leadership on promoting alternative energy, especially in Montana.  (Making consumer's pay for the higher cost of wind-generated electricity through taxes rather than their utility bills is just a shell game, but we digress...)  However, in this case he's doing American taxpayers a disservice by subsidizing a product that Americans will not benefit from.

Why it makes sense to Senator Baucus that we should be subsidizing Canadian electricity is beyond us.  Perhaps he never contemplated that those environment-hating Canadians would never be interested in alternative energy.  Or maybe it's just another example of old Max asleep at the switch.