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Court pauses new Montana Colstrip law

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Colstrip Power Plant

The Colstrip Power Plant, pictured on Oct. 2, 2020.

U.S. District Judge Susan Watters has blocked Montana from overriding portions of the private contract governing Colstrip Power Plant.

In an order Wednesday, Watters paused a new Montana law empowering the state attorney general to order power plant repairs and imposing fines of $100,000 a day against noncompliant Colstrip owners. The judge said the law is likely unconstitutional, which she will rule on at a later date.

The lawsuit in which the order was filed concerns Senate Bill 265, which requires that all litigation between the power plant owners take place in district court in Rosebud County, where Colstrip resides. The power plant's ownership agreement that's been in effect for nearly 40 years specifies that legal matters be settled in Spokane Superior Court in Washington.

The contract also spells out how decisions about maintenance and operations are made. In empowering the Montana AG to order repairs, the state has overridden portions of the Colstrip contract.

Attorney General Austin Knudsen received maintenance policing powers in May, when the Republican legislated Senate Bill 266 was signed into law by Gov. Greg Gianforte. The law attempts to prevent the majority owners of the coal-fired power plant from winding down maintenance as they prepare to exit in 2025.

Simply put, Colstrip Power Plant is in trouble. An overwhelming majority of its owners, 70%, do business in Oregon and Washington, and both states of have set deadlines for their utilities to get out of coal in order to reduce the amount of heat-trapping carbon dioxide emissions in the atmosphere. Washington’s deadline is the end of 2025. Oregon's deadline begins in 2030.

Gianforte made clear when he signed SB 266 into law that he was angered by the Pacific Northwest states' efforts to curtail climate change.

“Affordable power generated in Colstrip helped build Seattle’s big tech economy, but now woke, overzealous regulators in Washington state are punishing the people of Colstrip with their anti-coal agenda,” Gianforte said at the May bill signing.

Watters picked up on governor’s “woke” quip in her order, stating that evidence suggested the new law was intentionally discriminatory against the power plant’s out-of-state utility owners from the Pacific Northwest.

“The PNW owners have presented evidence, uncontroverted by the state and other defendants, that the purpose of SB 266 is to protect Colstrip Units 3 and 4 from ‘out-of-state corporations’ and ‘woke overzealous regulators in Washington state,’ as evidenced by the Governor’s signing statement and transcript of SB 266 hearings,’’ Watters concluded.

The bill to empower Montana’s attorney general to mandate power plant repairs put the owners’ battle over Colstrip’s future on public display. Lawmakers siding with the power plant’s minority stakeholders likened the battle over Colstrip’s future to a divorce.

State Department of Environmental Quality records obtained by Lee Montana Newspapers show state officials asking power plant operator and minority owner Talen Energy for things the government might enforce under the new law, for which Talen and NorthWestern Energy lobbied.

“It’s kind of like we’re having a divorce here. The West Coast operators, they’re leaving the facility. They don’t want to be part of it anymore for various reasons and that’s it, so be it,” Sen. Steve Fitzpatrick told the Senate Business, Labor and Economic Affairs Committee in February. “But instead of being civil about it and walking away and doing their fair share to keep the property in good condition, it’s like they’re trashing the facility on the way out. So, to take our divorce analogy, what they’re doing is trashing the house and keying the car on their way out the door. That’s what’s going on here and it’s just wrong.”

In the months before the legislative session, the Colstrip owners had stalled on passing a maintenance budget for 2021. The owners from Washington and Oregon — Puget Sound Energy, Avista Corp., PacifiCorp and Portland General Electric — objected to paying for repairs that extended the life of the plant beyond their time in Colstrip. There had already been movement in Washington to prevent utilities from passing to customers costs for power plant upgrades unnecessary to serve Pacific Northwest customers.

The maintenance dispute was followed by NorthWestern notifying the other owners that it wanted arbitration on whether a unanimous vote was needed to close the power plant. NorthWestern isn't in favor of closing Colstrip in 2025.

“The legislative action and stakeholder support associated with SB 266 was a disheartening development in the face of PSE’s effort to explore constructive solutions,” said PSE General Counsel Steve Secrist in a press release following Watters’ order. “PSE has consistently worked for constructive solutions regarding Colstrip, including the exploration of transactions and even financial contributions for the Colstrip community. Today’s ruling affirms PSE’s approach and intent.”

Puget had attempted to sell its share of Colstrip Unit 4 to co-owner NorthWestern Energy for the aggregate price of one dollar, but the deal fell apart under scrutiny from regulators and consumer advocates. The company has also given the town of Colstrip $10 million to transition to a post-coal life.

Montana’s attorney general chose not to offer a counter argument to the injunction. Watters noted the AG’s silence in her ruling.

There have been four different lawsuits concerning Colstrip Power Plant filed since May

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