Coal quandary: Avista uses cheap power, but Inslee wary

COLSTRIP, Mont. – On Montana’s eastern plains, there’s a town that was built to burn coal and produce electricity for the Northwest’s largest cities.

Smokestacks loom over Colstrip, a company town with 2,300 people, a coal mine and a coal-fired generating plant. The plant produces enough electricity to power 1.6 million households, energy that’s consumed hundreds of miles away in Spokane, the Puget Sound region and even Portland.

“This little community here helps you keep the lights on in Washington state,” Colstrip Mayor Rose Hanser said.

Colstrip’s low-cost megawatts are a source of pride for Hanser, but they’ve become a political target in Olympia.

Gov. Jay Inslee, a renewable energy proponent, wants to end “coal-by-wire” imports by Washington utilities, including Spokane-based Avista Corp. and Puget Sound Energy, which are part-owners of the Colstrip plant.

Calling coal-fired electricity “dirty and dangerous,” Inslee said replacing coal should be the first step in eliminating carbon dioxide emissions from the Northwest’s energy supply. About 14 percent of the electricity consumed in Washington comes from coal, but it produces about 80 percent of the state’s greenhouse gas emissions from electricity, according to a recent report.

The warming climate is threatening Washington’s economy and its quality of life, said Inslee, who’s also floating the idea of a state cap on carbon emissions.

Higher atmospheric concentrations of carbon dioxide mean smaller snowpacks, bigger forest fires and acidic, corrosive ocean waters, he said. Though Washington contributes less than 1 percent of global emissions, it has the technology, innovation and moral imperative to be a leader in reducing greenhouse gases, Inslee said.

Nationally, coal-burning plants are also under scrutiny, with the U.S. Environmental Protection Agency developing plans to regulate carbon emissions at new and existing coal plants.

Colstrip produced nearly 13 1/2 million metric tons of carbon dioxide and other greenhouse gases in 2012, according to EPA data. Among Northwest power plants, Colstrip by far is the largest emitter of greenhouse gases and it ranks 15th nationally.

“This is a huge plant in the middle of nowhere that has that kind of carbon footprint,” said Anne Hedges, deputy director for the Montana Environmental Information Center.

The Colstrip Steam Electric Station is operated by PPL Montana, but its ownership represents six of the Northwest’s largest utilities. Other utilities with a stake in Colstrip are Portland General Electric; NorthWestern Energy LLC in Montana; and PacifiCorp, whose Portland-based subsidiary serves parts of Oregon, Washington and California.

Environmental groups describe Colstrip as a liability for utilities and their ratepayers, given the uncertainty surrounding future carbon costs.

Utilities, however, view Colstrip as a well-run plant that contributes to the Northwest’s low electricity rates.

Avista owns a 15 percent share in the newest two of Colstrip’s four coal-fired generating units, which were built in the 1980s.

Colstrip represents a good value for Avista’s 358,000 electric customers in Eastern Washington and North Idaho, said Jason Thackston, the utility’s senior vice president of energy resources.

After hydropower, Colstrip is Avista’s lowest-cost source of electricity. The utility won’t reveal figures, but Thackston said Colstrip beats electricity costs from Avista’s natural-gas-fired turbines, wind farm contracts and biomass plant in Kettle Falls.

During a week in late January, Avista didn’t get any energy from the Palouse wind farm south of Spokane because the wind wasn’t blowing. Colstrip, which is designed to operate continuously, helped keep industry running and lights on in the Inland Northwest, Thackston said.

In a 20-year plan submitted to Washington’s Utilities and Transportation Commission last year, Avista said the company intends to keep its stake in Colstrip for the foreseeable future. Replacing the power from Colstrip would cost Avista customers about $50 million more each year, the utility said.

Carbon regulations, however, could change Avista’s approach.

Avista officials said they can make other environmental upgrades to the plant and still produce cost-effective electricity for customers. But reducing or capturing greenhouse gases from coal plants isn’t commercially viable at this time, Thackston said. Using the current technology for carbon capture or reduction at Colstrip would result in electricity costs that are triple or quadruple current market prices.

“Where we sit today, it’s not clear what the future of coal generation is,” Thackston said.

Colstrip represents the energy quandary facing the United States. The nation is home to the world’s largest estimated coal reserves, a supply that could last 200 years at current production levels. But coal-fired electricity ranks among of the country’s top sources of carbon emissions. In Washington, it follows vehicle emissions as the second-largest source of greenhouse gases.

Colstrip’s future is a discussion that should involve the entire Northwest, said Grant Ringel, a Puget Sound Energy spokesman.

“You can’t downplay the contribution Colstrip makes to the reliability of the electric system in the whole region,” Ringel said. “It saves our customers millions of dollars every year.”

Nearly a fifth of Avista’s electricity comes from coal

In the hydro-friendly Northwest, where nearly half of the electricity comes from dams, residents might be surprised by how much of their power is coal-based.

Coal-fired generators produce about 17 percent of the electricity used in Washington, Oregon, Idaho and Montana. At Avista, 19 percent of the utility’s electricity comes from coal. Puget Sound Energy, better known for its wind farms, gets 30 percent of its electricity from coal.

Coal’s contribution to the power grid gets downplayed, said Doug Howell, senior representative for the Sierra Club’s Beyond Coal campaign in Seattle, noting that utility websites are more likely to feature shots of wind turbines and water spilling over dams than smokestacks.

Colstrip and the region’s two other coal plants date to the 1970s, a time of rapid population growth in the Northwest. With no sites left for big hydroelectric dams, utilities looked to other types of electrical generation, including coal.

By 2025, however, less of the Northwest’s electricity will be coal-based. Legal challenges over emissions have led to an announced closure of one coal plant and a fuel conversion at another.

Portland General Electric’s coal plant in Boardman, Ore., will close by the end of 2020, 20 years ahead of schedule. The utility negotiated the early closure to avoid spending hundreds of millions of dollars in upgrades to reduce emissions responsible for smog, haze and mercury in the Columbia River Gorge.

At its plant in Centralia, Wash., TransAlta Corp. will convert two coal-fired boilers to natural gas by 2025. Natural gas produces about half of the greenhouse gas emissions that coal does.

Both plants were targets of lawsuits by environmental groups including the Sierra Club, which is also suing Colstrip over emissions.

The EPA’s requirements for reducing regional haze from Colstrip are being challenged by the Sierra Club and the Montana Environmental Information Center, which said the agency should enforce stricter pollution limits at the plant. In addition, the groups sued Colstrip’s owners last year over alleged federal Clean Air Act violations, saying that Colstrip’s pollution controls weren’t upgraded as required when the plant went through major expansions.

The utilities wouldn’t comment directly on the lawsuits, but said they’ve spent $97 million on new air pollution controls since 2000.

Colstrip was built after passage of the federal Clean Air Act in 1970, which gives it an advantage over older coal plants, said Gordon Criswell, the plant’s environmental compliance director. Colstrip emits less soot, mercury, and smog- and acid rain-causing pollutants than most U.S. coal plants, he said.

Avista owns a share of two Colstrip generating units built in 1984 and 1986. Company officials said the newer units have better pollution controls, which reduce the utility’s future costs for environmental compliance.

Puget Sound Energy, however, has a 50 percent ownership in Colstrip’s two older units, which has raised questions from state utility regulators.

Given the likelihood of carbon costs and tougher environmental regulations, Puget Sound Energy needs to conduct a thorough analysis of whether those units should be part of the utility’s future energy supply, the Washington Utilities and Transportation Commission said in a statement last month.

Northern Pacific first to use coal mined in Colstrip

When Mayor Hanser looks around Colstrip, she doesn’t see a big polluter. She sees a clean, well-run community with family-wage jobs.

Colstrip lies east of Billings, a two-hour drive through a stark landscape of sagebrush-covered hills and scattered ranch houses. It’s a true company town, designed and built in the 1970s by the owners of the coal mine and the generating plant.

About 80 percent of the local labor force works at the mine or the plant, which together account for more than $100 million annually in taxes to the state, school districts and local governments.

Wages at the two facilities are the envy of other Montana communities. At the Colstrip generating plant, most workers earn between $25 and $40 per hour. At the coal mine, the average wage is $34 per hour.

“When you’re threatening the energy industry, you’re threatening the jobs of families,” Hanser said. “Coal is the anchor investment in our energy portfolio in the United States. I think we really need to ask hard questions instead of just getting rid of any energy sources.”

The Rosebud Mine that feeds Colstrip’s boilers is part of the Powder River Basin of Montana and Wyoming, which accounts for most of the nation’s coal production.

Millions of years ago, lakes and swamps covered this area. Carbon-rich vegetation was buried, heated and eventually transformed into coal.

Southeast Montana’s coal outcroppings are so distinct that even the Lewis and Clark expedition took note of them, said Kent Salitros, president and general manager of the Rosebud Mine, which is owned by Western Energy Co., a subsidiary of Westmoreland Coal.

The Northern Pacific Railroad was the first to mine the Rosebud deposit, using the coal for steam-powered locomotives. After the railroad switched to diesel in the late 1950s, the town sat idle until new owners purchased Colstrip and rebuilt it for power production.

The Rosebud is a strip mine, encompassing 80 square miles. Blasting loosens the soil covering the coal; one of the mine’s engineers created a video of the exploding dirt set to AC/DC’s heavy metal hit “Thunderstruck.” Then, the enormous claw of a dragline excavator scrapes away the earth, revealing the 24-foot-thick seam of coal underneath. After the coal is removed, the land is recontoured to its original topography.

Coal from the Rosebud Mine is low in sulfur, which reduces the output of acid rain-forming emissions when the coal is burned. Colstrip residents actually use it in their fireplaces. “It’s easier than chopping wood,” Salitros said.

Part of Colstrip’s favorable economics comes from the mine’s proximity to the generating plant. A 4-mile-long conveyor belt hauls the coal from the mine to the plant, where it’s crushed to the consistency of talcum powder.

The pulverized coal is blown into the boiler, where it’s burned, producing superheated steam. The steam – 1,000 degrees and under 2,500 pounds per square inch of pressure – turns the turbines that generate electricity.

Each year, Colstrip’s four generating units burn about 10 million tons of coal from the Rosebud Mine. Every five minutes, the boilers consume a rail car worth of coal.

Even at that pace, the Rosebud has enough coal to supply the generating plant for at least another 30 years, said Salitros, the mine manager.

High-voltage transmission lines whisk the electricity across Montana’s sparsely populated plains and over the Rockies. Nearly 500 miles later, the lines tie into a transmission grid near the Idaho border, en route to the Northwest’s population centers.

‘All coal plants … are on the defensive’

How much would it cost Northwest ratepayers to close Colstrip? That analysis should be available next year.

The Northwest Power and Conservation Council in Portland is preparing a regional energy blueprint, which looks 20 years into the future. The plan will be out in late 2015, when federal action on carbon costs should be clearer.

“I think all coal plants, including Colstrip, are on the defensive on this point,” said Tom Karier, Washington’s representative to the four-state power council, which is tasked with ensuring an affordable and reliable Northwest energy supply.

“People anticipate higher and higher costs for carbon, and current market prices for natural gas are very low,” Karier said. “Those factors are really challenging the economics of coal.”

In addition to producing fewer greenhouse gas emissions than coal, natural gas is more versatile, Karier said. Gas-fired turbines can be quickly fired up or ramped down to respond to spikes or drop-off in wind generation.

With the growth of Northwest wind farms, that’s become a valuable asset, Karier said. Coal plants don’t have that flexibility.

In evaluating a Northwest future without coal, “it’s important to get the economics right,” Karier said.

The council determined in 2010 that the Northwest would need to retire some of its coal plants to meet carbon emission goals, Karier said. That analysis also indicated that the lost electricity could be replaced with a combination of energy efficiency, natural gas generation and some renewable energy.

Unlike the TransAlta plant in Centralia, Colstrip isn’t positioned to convert to natural gas generation. Colstrip isn’t near a major gas pipeline, and even if it was, utility officials said it would be technically difficult to convert the boilers, resulting in an inefficient operation.

But Colstrip is near some of Montana’s “wind-rich” areas, Karier said. Development of wind farms at those sites has been hampered by the lack of transmission to bring the electricity to population centers on the coast, he said.

Last year, Inslee told the power council he’d rather see Washington import solar or wind energy from anywhere in the West than rely on coal.

“We need action,” he said in an interview last week. “(Carbon pollution) comes out of the smokestacks of coal-fired plants by the megaton.

“It’s changing the climate we live in,” Inslee said. “This isn’t just the polar bears at risk, it’s our children’s health.”