Reducing Pollution Does Not Threaten Montana Economy

There are many reasons to be skeptical of this hypothesized Montana economic death spiral

By Thomas Michael Power

NorthWestern Energy (NWE) recently forecast that federal efforts to stabilize our climate by reducing the amount of carbon pollution are bound to do significant and permanent damage to the Montana economy. In NWE’s scare story, the only way that Montana can meet its obligations under the EPA’s Clean Power Plan is to shut down all four of the Colstrip electrical generators by 2022, eliminate the coal mine that fuels them, abandon the high voltage Colstrip power line, and build expensive replacements for them all.

To get these dire results, NWE had to develop a domino theory of cascading consequences that get more dire as they go. It starts with the false assumption that only shutting down parts of the Colstrip coal-fired electric generators will meet the Plan’s carbon pollution reduction goals. Since just shutting down Colstrip 1 and 2 would not reach the carbon pollution limits, NWE assumes that there would have to be less generation at Colstrip 3. But that would make Colstrip 3 uneconomical to run at all. Without Colstrip 3 running, Colstrip 4 would not be viable. Presto: The entire Colstrip complex would have to close by 2022 along with its associated coal mine.

But, according to NWE there are still more dominos to fall: With the shutdown of all of the generators, the 500 kV Colstrip transmission line would cease to be functional and would be abandoned. That would make it difficult for large industrial and commercial operations in Montana to import the electricity they need. Costly new electric generation plants and transmission lines would have to be built. Electric rates to businesses in Montana would skyrocket, putting them at a competitive disadvantage. And the economic dominos would keep on falling.

There are many reasons to be skeptical of this hypothesized Montana economic death spiral:

  • NWE owns only about 10 percent of the capacity of the Colstrip plants. The other 90 percent owners are not making these claims. Nor are they suing EPA to stop the national effort to reduce carbon pollution.
  • EPA’s carbon control regulations do not mandate anything about the Colstrip plants. EPA has set a cap on the carbon pollution coming from all existing fossil-fueled electric generators and asked states to come up with plans to meet their target reductions in the least cost and socially most acceptable manner as seen by the states themselves.
  • Among the carbon pollution reduction measures Montana could chose to adopt are energy efficiency improvements at the generators and in customers’ use of electricity, adding more low or zero carbon renewable generation, and purchasing available emissions allowances.
  • The State of Montana is tasked with the job of putting together a plan to reach its assigned carbon pollution reduction target. A working group is being assembled now to produce that plan. NWE does not know what the Montana plan will contain.
  • The shutdown of the dirtiest and least efficient coal-fired generators in Montana can also contribute to meeting the carbon reduction target. Colstrip 1 and 2 as well as the Lewis and Clark generator at Sidney are already being considered for retirement for reasons unrelated to the Clean Power Plan, just as the old Corette plant in Billings was recently retired.
  • There are eight Montana coal-fueled electric generation units subject to the rule, not just the four at Colstrip. To the extent that Montana plans to meet some of its assigned carbon pollution reductions by shutting down some of the older, dirtier, and less efficient electric generators, there is a broader group of plants to contribute to that.
  • Because most of the Western states have carbon control targets that can easily be met, utility projections are that there will be an abundance of carbon emission allowances available for purchase relatively cheaply by the few Western states, like Montana, that have more challenging carbon reduction targets.

Instead of analyzing the broad array of ways that Montana can meet its obligation to reduce carbon pollution under the Clean Power Plan and contribute to the development of a Montana plan, NWE has simply taken to shouting hysterically that the sky is falling and that the only way to avoid economic catastrophe in Montana is to abandon efforts to stabilize our climate.

The flexibility allowed under the Clean Power Plan and a realistic review of the electricity infrastructure in place in Montana clearly indicate that that just is not so.

Thomas Michael Power is Professor Emeritus in the Economics Department at the University of Montana and a principal in Power Consulting, Inc.