Montana energy economy dims, but consumers benefit
Montana’s energy economy is dimming, according to reports from both alternative and fossil fuel industries.
Coal is on the ropes as U.S. coal energy consumption hits a 24-year low, oil drilling has dropped off dramatically in the Bakken and wind energy construction is soft. The natural resources and energy industries that account for almost 20 percent of Montana’s economy have lost some spark. However the cheap energy has been good for everyone else, said Patrick Barkey, Montana Bureau of Business and Economic Research economist.
“It depends on what you mean. It’s been a pretty good time to be a consumer,” Barkey said.
Several causes are short-circuiting the energy economy. The price of oil started a steep decline last fall as global production surpassed demand. The American Petroleum Institute reported the oil wells are currently producing about 3 million more barrels of oil a day than the world’s population is consuming. That over-supply has suppressed drilling for new oil. Montana oil drilling activity flatlined in March.
In North Dakota, which has led the U.S. in oil drilling this decade, active drilling rigs are down to 82, fewer than half the number active at the peak of 2014. Rig numbers in North Dakota were slightly up in reports issued Monday.
Through April, U.S. coal production has been down from a year ago in every month but January. U.S. coal mines have produced 23.6 million fewer tons of coal during the period.
Arch Coal, which is seeking approval of what could be the largest coal mine in the United States near Otter Creek and approval of the Tongue River Railroad to haul the coal, has been put on notice that it risks being delisted from the New York Stock Exchange because it’s consistently traded for less than $1 a share. Arch lost $558 million in 2014 and $641 million in 2013. Its long term debts exceed $5 billion. The coal company’s per share stock price was 45 cents Wednesday.
An undercurrent of cheap natural gas has been cutting coal industry profits for a couple of years. Tighter clean air regulations targeting coal-fired power plants also aren’t helping.
Wind energy’s future in Montana has been blown back by state regulators and flagging congressional support for federal tax incentives.
Montana’s Public Service Commission has rejected NorthWestern Energy attempts to add more wind power to its portfolio. In some cases, the wind projects rejected, like last year’s Key West development near Fairfield, offered power below the cost of hydropower agreements the PSC had previously approved. The PSC said it was concerned the wind power rates wouldn’t stay low. In other cases, the regulator debate has centered on how much of the profit from a wind farm was going to out-of-state investors.
Wind farm construction in the state has stalled with the death of the federal Wind Energy Tax credit. The credit was offered for one month in 2014 and hasn’t been renewed by Congress this year.
But Jeff Fox, Montana policy manager for Renewable Northwest, said efforts to curb carbon pollution on the federal level and in neighboring states like Washington and Oregon, will work in wind’s favor if successful.
“It’s a little slow right now for sure, but long term we definitely see renewables playing an increasing role in the region,” Fox said.
Wind energy added to Montana’s energy portfolio would actually benefit coal energy, Fox said, because coal power’s overall share of the energy supply, expressed as a percentage, would be reduced.
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