Colstrip: What Do The Owners Of A Massive Power Plant Owe The Society That’s Been Built Around It?

If you want to visit Ground Zero in the intra-GOP debate about what private businesses owe the society that has been built around them, look no further than Montana’s Senate Bill 338.

It specifies that when a coal plant above a certain size in Montana closes, as two units of the Colstrip Generating Station in southeastern Montana are expected to do no later than July 2022, the plant owner has to pay for decommissioning costs. Ordinary enough, right? Well, sort of—we expect heavy industry to clean up after itself. But those “decommissioning costs,” as the legislation defines them, do not just include demolishing the facility.

When the Colstrip station closes, barring a miracle, the community is going to become a shell of its former self. The power plant’s place in that community makes Malmstrom Air Force Base’s place in Great Falls look small. A plant closure means an instant reduction in property values, a cost shift to the remaining taxpayers in the county, and a lot of stranded assets in the form of local government projects that still have outstanding balances on their bond arrangements. The cost of all of these consequences of the plant closure are things the legislation includes within its definition of “decommissioning costs.” In other words, if the legislation becomes law, the power plant owners will have, among other things, the obligation to pay out howeowners and small businesses who find themselves underwater in their mortgages.

If those coal plants stay open longer, then they get a break from paying this bill, on the theory that their continued employment of locals and continued tax payments reduce the burden that the plant closure will transfer to others.

The Great Falls Tribune reported out a specific price tag to this legislation. But the actual numbers are not specified anywhere in the legislation, and would be subject to a process where people could submit their claims to a state agency, the Department of Environmental Quality, that’d adjudicate the total amount of “decommissioning costs.”

There are good arguments on both sides of the legislation.

On the one hand, this bill is a big intervention in the affairs of “private” business. Don’t power plant owners have enough regulatory burden without further legislation requiring “exit fee” payments? Didn’t the workers at Colstrip understand that they were working in and living in an economy with one big fish, and that their property values, their livelihoods, and their schools would all be worse off when that employer decided to pick up and go? Maybe. Laissez-faire.

On the other hand, this is a power plant that isn’t really closing because of the “free market.” It is much more like the decision the government makes with respect to a big employer like… Malmstrom. The proximate cause of the plant closure is environmentalist pressure in Washington (both of them – D.C. and State).

Up until just a year ago, one of the Colstrip plant owners, Puget Sound Energy, which is the electric utility for the metro Seattle area, was singing its praises, suggesting it was one of its cheapest resources. That ended the day when the Sierra Club and Puget, and also Talen Energy, signed an agreement to close Units 1 and 2 of the facility by mid-2022 instead of facing further litigation over ash ponds near the property. For companies like Puget Sound Energy, that’s all fine. They stand to get all the money they need to close and all the money the need to build a new power plant, likely a gas plant and a wind farm in Washington State, to replace the power supply. That’s because they’re a regulated utility. (Talen, meanwhile, is a so-called merchant utility. It doesn’t have a captive set of ratepayers to charge its expenses; its revenues are subject to the open market’s prices for energy, although these prices themselves are the function of a glut of oversupply that has resulted from other government policies.)

So here’s the question: When a regulated utility gets co-opted to do something that is not economic, all with the assurance that the utility is going to be made whole by the same politicians who pressured them to close it, then what is the “free market” response from Montana legislators? To do nothing? That might just make you a quiet partner of Washington politics.

There’s peril in this for the Montana left too. It was the Montana Environmental Information Center (the Sierra Club’s local branch) that filed the litigation that is resulting in the closure of Units 1 & 2 of Colstrip. Does the Sierra Club want to give the workers there a fair shake – or not? If they don’t give a fair deal to those workers, “MEIC” and “Sierra Club” are going to be remembered forever as the names that, in the eyes of those workers, ruined their lives.

This bill could be a loser or a winner. The politics aren’t clear on it. Labor Democrats probably will love it, some of the environmentalist D’s might hate it. For Republicans, SB 338 might be a litmus test for who in the Montana GOP is a “Trump Republican” and who is not. Trump, of course, has been fully willing to intervene in these situations, using the powers of the state, or at least his suggestion of them, to save jobs and promote local economies. Will Montana’s legislative Republicans do the same?

You can track SB 338 here. It’s up for a hearing next week, on March 16.