Operator: Two units of Montana coal plant to close this year

HELENA – The company that operates a coal-fired power plant in eastern Montana said Tuesday it will close two of the plant’s four units about 30 months ahead of schedule because of the high cost of running them and the unwillingness of its coal supplier to lower prices.

Talen Montana said in a statement the older units of the Colstrip Steam Electric Station, whose combined 614-megawatt capacity is co-owned by Talen and Puget Sound Energy, will be permanently retired on Dec. 31. The newer Colstrip units, which generate the bulk of the 2,100-megawatt plant’s output and are owned by six companies, – including Spokane-based Avista Corp. – will continue operating, though those whose livelihoods depend on the plant worry it also may be shuttered early.

The partial closure would be the latest among coal-fired plants going offline across the nation. Demand for coal is dropping as utilities turn to cheap natural gas and renewable energy, while pollution rules increase coal power costs and some states worried about climate change seek to divest from coal.

The older units had been slated for closure by mid-2022 as part of a settlement in an environmental lawsuit. The decision to retire the units early came after an extensive review and exhaustive efforts to make the units economically viable, Talen Montana President Dale Lebsack said.

“Fuel constitutes the bulk of our operating cost, and our repeated efforts to negotiate lower fuel prices with Westmoreland Rosebud Mining, the plant’s sole and only historically permitted fuel supplier, have been rebuffed.” Lebsack said in the statement. “Rather than working with us to keep Units 1 and 2 open, Westmoreland is proposing to increase the units’ fuel cost going forward.”

Avista bought a 15 percent stake in Colstrip’s units 3 and 4 in the 1980s. The utility gets about 9 percent of its electricity from the coal plant.

The Spokane company recently agreed to a new depreciation schedule, which assumes the units remaining useful life is through the end of 2027. However, the utility hasn’t agreed to a closure.

The adjacent Rosebud mine is owned by a subsidiary of Westmoreland Coal Co., which emerged from bankruptcy this spring as a private company owned by former creditors. A message left at the company’s headquarters in Englewood, Colorado, was not immediately returned on Tuesday.

Colstrip is the one of the largest coal plants west of the Mississippi River, and the small town of 2,300 where it’s located is dependent upon the plant for a large part of its economy. It has about 320 workers on site, according to Talen, and mining the coal provides more jobs.

The town has been bracing for the closure because of a legal settlement with conservation groups aimed at resolving a lawsuit over decades of pollution from the plant, but its residents had hoped to keep the units running at least until the June 2022 deadline mandated by the settlement.

Colstrip Mayor John Williams said he was hopeful Talen and Westmoreland still could work out a deal, but was uncertain whether it’s not too late for Talen to reverse course.

“We’ve been working hard to encourage other entities to come to Colstrip, to diversify our economy but at this point in time we haven’t been successful,” Williams said.

Republican state Sen. Duane Ankney, whose district includes Colstrip, said Tuesday’s announcement doesn’t appear to be a negotiating ploy.

“They’re bleeding several million dollars,” Ankney said. “I might be wrong, but if I had to make a bet, I’d say this isn’t a tactic, this is what’s going to happen.”

Talen spokeswoman Taryne Williams said the company was “focused on ensuring Units 3 and 4 remain economically viable” and was still ready to work with Westmoreland on a coal supply deal for those two plants, but not 1 and 2.

Anne Hedges, deputy director of the Montana Environmental Information Center, one of the plaintiffs in the lawsuit against Colstrip, said the early closure is a reflection of the market changing more quickly than anybody anticipated.

“It’s a wake-up call to Montana to pay attention, get with the program and figure out how we’re going to develop energy sources the rest of the world wants to buy and are affordable,” she said.

Pennsylvania-based Talen for years has been saying the plant is not economically viable, with company officials saying in 2017 that they were losing about $30 million a year. State lawmakers made several efforts to prop up the plant, including passing a measure allowing the company to borrow up to $10 million a year from the state and a failed bill to allow NorthWestern Energy to buy out other Colstrip owners for $1.

Colstrip residents also worry that the plant’s newer units also will be shut down a few years later as the plant’s other utility owners located in Washington and Oregon seek to remove coal from their own power portfolios.

Talen’s coal contract with Westmoreland is up at the end of the year and Talen executives are seeking a “competitive offer” from the mining company, Williams said.

Ankney said news of the partial closure should rally leaders to redouble their efforts to keep the rest of Colstrip operating. State lawmakers don’t meet again until 2021, and Ankney said in that interim, he and others will brainstorm proposals.