Southern Montana Electric’s 250-MW Coal Plant on Hold, Not Dead

The 250-MW Highwood coal-fired power plant doggedly pursued by the Southern Montana Electric Generation & Transmission Cooperative (SME) has not been scrapped, as has been widely reported by other media sources. It has been put on hold while the cooperative pursues a more expeditious route to meeting power demand by building a 120-MW combined-cycle natural gas–fired plant and erecting at least 6 MW of wind turbines.

SME’s general manager had been widely quoted as saying that regulatory uncertainties made raising money for the project tougher, therefore making it impossible to build. But those reports were inaccurate or incomplete, said SME attorney Kenneth Reich. “The project has not been dropped,” he told POWERnews.

The cooperative, which serves 120,000 Montanans, had for four years stuck to its plans to build the $950 million circulating fluidized bed boiler power plant, obtaining all required permits, including one for particulate matter 2.5 microns or smaller—the first of its kind in the U.S., said Reich.

Though the cooperative broke ground in October last year, a May 2007 air quality permit, which had been revised following a prior appeal, was again appealed in November, this time by four conservation groups, including the Sierra Club. The groups contended that the plant lacked effective emissions controls. Like many new coal-fired plants proposed in the U.S., the Highwood plant is also embroiled in a pending lawsuit in a state trial court over carbon dioxide emissions, Reich said.

“We’re now in February 2009, and we’re still dealing with appeals to our permit,” The Great Falls Tribune quoted SME General Manager Tim Gregori as saying in a speech to members of the Electric City Power Board on Monday evening.

SME is made up of four rural cooperatives. A fifth cooperative, the Yellowstone Valley Electric Cooperative (YVEC), had in December sued SME to get out of the project because YVEC had become increasingly concerned about whether the power plant would be built, citing the projects costs, which had escalated from $456 million to nearly $900 million, The Great Falls Tribune reported on Dec. 16.

But the decision to build a $210 million gas-fired plant wasn’t based on money, Gregori said in a Feb. 2 sound byte from montananewsstation.com. “Quite frankly, the decision wasn’t made on economics,” he said. “A natural gas–fired facility is still more expensive [to run] than a coal-fired facility, but I can build the gas plant and get it online by 2011, and I’m not sure I’ll be build the other one in the same period of time.”

Under its charter, SME is required to meet the electric power needs of the cooperatives it serves. But it does not have the capacity to meet all its members’ power needs beyond roughly 2010. The cooperative projected (PDF) it will have a resource requirement or deficit of approximately 116 MW in 2009. In five years, that deficit will grow to approximately 160 MW.

That’s why, after evaluating alternatives for power suppliers to replace wholesale power supply contracts due to expire at the end of this decade, SME determined in 2004 that the “best course of action” was to construct a coal-fired power generating plant, the cooperative says on its web site. The original plan included building four wind turbines to generate 6 MW of wind power.

On Monday, Gregori reportedly admitted that the 120 MW of gas-fired power won’t be enough to fill the electricity needs of the cooperative, but he told the members of the Electricity City Power Board that SME will have to buy additional power and blend the rate—at an additional cost to consumers. He also reportedly said that was the reason he wasn’t giving up on a coal plant. “We still believe coal is going to be in the future sometime down the line,” he told The Tribune.

SME attorney Reich confirmed this to POWERnews, saying that while the cooperative assessed its regulatory options, it would pursue a short-term plan to provide power to its customers. “Ideally we’re trying to preserve the [coal plant’s air quality] permit, not let it drop,” he said.

Sources: SME, The Grand Falls Tribune, montananewsstation.com, U.S. Dept. of Agriculture, POWERnews