Retiring and replacing Montana’s Colstrip Generating Station, an important supplier to Puget Sound Energy, could be distressingly complicated and costly, public officials and energy executives are finding.

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OLYMPIA — Montana’s Colstrip Generating Station may be 650 miles from the Washington state border, but the coal plant continues to vex lawmakers, regulators and energy executives.

The Colstrip station — which supplies about 20 percent of the power used by Puget Sound Energy (PSE) — has been listed as one of the biggest polluting coal facilities in the country, according to studies by environmental advocacy groups using government data. The Sierra Club and Montana Environmental Information Center have sued in federal court, alleging the plant violates Clean Air Act standards and calling for pollution-control upgrades or, absent that, fines for the owners.

But with worries about pollution, and the nation’s push toward cleaner power, come worries over money.

Washington’s Utilities and Transportation Commission (UTC), which regulates PSE and approves its rate changes, has been concerned that between the low cost of natural gas and possible higher costs for pollution control or carbon pricing, Colstrip may not be financially feasible in the future. That, in turn, could hurt the wallets of the company’s approximately 1.1 million electricity ratepayers.

Lawmakers in Olympia this year discussed several proposals to set up a process for the eventual decommissioning of Colstrip’s two oldest units — but couldn’t find consensus to move forward.

The proposals prompted rebukes from politicians in Montana — where the plant employs about 360 people and generates tax dollars sustaining a rural economy — and have some Washington lawmakers worried about the ripple effects of a total or partial shutdown.

Yet efforts continue. The UTC this summer announced it would study how much it would cost to decommission the older parts of the plant — a key number missing from the discussion.

And the Senate Energy, Environment and Telecommunications Committee is planning a fall work session in Spokane, where Washington lawmakers and utility commissioners will meet with their Montana counterparts, according to Sen. Doug Ericksen, R-Ferndale, who is committee chairman.

The Colstrip discussions come during a year of raucous debate over how to slow climate change by transitioning to cleaner energy.

Protesters in Seattle recently tried to stop a drilling rig bound for the Chukchi Sea off Alaska’s North Slope, and Gov. Jay Inslee announced he would use executive authority to craft rules capping carbon emissions after state lawmakers refused to act on his climate-related proposals. There has been continued opposition to proposed coal-export terminals, including by Native American tribes, and this summer the U.S. Environmental Protection Agency released new plans intended to lower carbon emissions.

By comparison, talks regarding Colstrip’s future have been fairly low-key. But the Colstrip station fits squarely into this broad debate. Closing Colstrip — the second-biggest coal-fired facility west of the Mississippi River — would be a very tangible move toward cleaner energy, said Doug Howell of the Sierra Club.

“Retiring Colstrip will be the greatest greenhouse-gas reduction ever achieved in the Northwest,” said Howell, a senior representative of the organization’s Beyond Coal campaign.

But the way forward is strewn with difficulties. Several companies, along with PSE, have ownership stakes in the plant, complicating shutdown efforts and the determination of liability over the plant’s environmental waste.

Grant Ringel, spokesman for PSE, said the Legislature’s work this year “sets up a productive conversation for next session.”

“I think certainly there is a tremendous amount of momentum nationwide to move forward from coal,” Ringel said. But, “there’s still a tremendous amount of work to do to figure out how much of that is feasible.”

Closure may be costly

The Colstrip station — actually four different plants, of which PSE owns varying stakes — is found in a town of the same name about 120 miles southeast of Billings. Colstrip 1 and 2 were built in the 1970s — PSE owns a 50 percent stake in those two — and are considered less efficient than their younger counterparts. PSE also owns a 25 percent share in Colstrip 3 and 4 with additional companies.

To decommission the older plants, PSE needs authorization from Washington state to buy out co-owner Talen Energy.

Several bills this year sought to grant that authority and let PSE issue bonds and charge ratepayers a special fee to provide for the costs of closing down the plants. Lawmakers struggled with the proposals — House Bill 2002, Senate Bill 5874, Senate Bill 6132 — through June, but the bills either died or were watered down, and none reached floor votes in both chambers.

The idea would be to start payments now and stretch them over timeto “ease the hit on ratepayers,” according to Howell.

When speaking in support of SB 6132 in a June committee meeting, Ericksen described the approach as risk management.

“The way I view this legislation is as a risk-management tool for an investor-owned utility to be able protect the interests of their ratepayers in an uncertain energy future,” he said.

Ericksen cited several factors that could force Colstrip’s closure, such as action by the federal government or the state Legislature, or a ballot initiative.

It isn’t yet known what it would cost to retire and clean up the plants. Howell points to a passage in one proposal, SB 5874, suggesting it could reach $500 million. Ringel and lawmakers say either they don’t know the cost or that it won’t ultimately be that high.

But, “it’s going to be very, very expensive,” said Sen. Tim Sheldon, D-Potlatch, who caucuses with Republicans.

Hence the UTC study, announced in July, to determine costs. It calls for PSE and other interested parties to submit written comments to the commission — due Tuesday — detailing, among other things, how much it might cost to decommission and clean up the sites of Colstrip 1 and 2.

The study will help “do a more thorough examination of what liabilities are out there,” according to Lauren McCloy, legislative and energy policy analyst with the UTC.

Those liabilities include ponds around the plant where coal ash is stored and which would have to be cleaned up. In 2008, PSE and Colstrip’s other owners paid $25 million to settle a lawsuit alleging that leaks in at least two of the ponds had contaminated water under at least one Colstrip neighborhood, according to a report in the Helena Independent Record. In the lawsuit, 57 plaintiffs — including some plant employees — alleged that Colstrip’s operators knew of the leaks years before telling the community, according to that report.

After the UTC announced its study, environmental groups petitioned the commission to begin to determine whether consumers are being harmed by PSE’s investments in the plant. The petition, filed by the Sierra Club, Washington Environmental Council and Climate Solutions, also asks the commission to compare the financial risks of keeping Colstrip going versus retiring it.

On Friday, a dozen Democratic lawmakers sent the UTC a letter supporting that petition.

Ericksen, a leading critic of Inslee’s climate-change proposals, has questioned the UTC’s study on decommissioning costs. In July, he sent a letter to the UTC asking, among other things, how the commission has authority to conduct the study, and whether it was coordinating with other state agencies or people in the executive branch.

While Ericksen says the issue remains “at the top of the list,” he’s not necessarily in a rush to close down Colstrip, saying recently, “We don’t want to retire these facilities prematurely.”

Sen. Kevin Ranker, D-Orcas Island, pointing to the lack of climate-related legislation coming out of Olympia, said he isn’t optimistic over progress.

Ranker, who has worked on the issue and co-sponsored one of the bills with Ericksen, said he believes PSE is working in good faith toward a solution. But if lawmakers can’t find a plan for Colstrip, he said it could be time for a ballot initiative.

“If those of us in Olympia won’t lead, maybe it’s time for the people to,” said Ranker, adding later: “PSE ratepayers do not want to be buying coal.”

Replacing the power

There’s also the matter of replacing the electricity presently coming from Colstrip.

Ringel, the PSE spokesman, said all viable alternatives, including natural gas, wind and solar power — or a combination — are possibilities. Ericksen and Sheldon raised the prospect of nuclear power, possibly in the form of small module reactors.

Bill Arthur, a regional director with the Sierra Club’s Beyond Coal campaign, said whatever replaces the plants should be cleaner energy. Arthur envisions a mix of wind and solar power, built possibly both in Washington and in Montana, to replace the coal plants.

“We don’t see a lot of value in replacing one fossil fuel with another fossil fuel,” said Arthur. “Even if natural gas is cleaner.”

The conversation over Colstrip’s demise has not been well-received in Montana. After word about Mount Vernon Democratic Rep. Jeff Morris’ decommissioning bill spread last winter, Montana Gov. Steve Bullock sent a letter detailing his concerns.

“I agree that climate change is a serious issue that warrants prompt action, and most Montanans agree with me,” Bullock wrote in a letter to Morris and a co-sponsor. “However, I have grave concerns when one state takes action that could have significant economic consequences for another state, on a matter that will require action on a much larger scale to be successful.”

In the spring a Montana lawmaker, Rep. Duane Ankeny, R-Colstrip, sponsored a bill that would force PSE to pay a series of fines and taxes to offset economic damage of retiring the plant early.

Morris said he believes the two states could work together. Maybe Washington state could buy replacement power from Montana, such as from wind farms, Morris said.

“If our governor and their governor could say, ‘Hey, we’re creating more jobs and taking carbon down to zero,’ ” said Morris. “That’s a win-win.”