Understanding electricity in Montana : a guide to electricity, natural gas and coal produced and consumed in Montana (Volume 2002) online

Glendive. and f^diles City Company consumption and unbilled customer consumption as part of a lease agreement at Saco are not included

The 1975-81 data uses slightly different sector definitions; as a result, consumption in the "Other" sector is not shown separately tor these years

Since 1982 "Other" includes interdepartmental sales

From 1992-2000, amount sold is reported in Dekatherms rather than MCF From 1995 on, amounts for industnal and other usage not reported by MDU-

* "Other" includes safes to Malmstrom Air Force Base and other public authorities.

In 1999. Great Falls Gas became Energy West.

^ "Other Utilities" includes the following companies (listed in approximate descending order by volume of saJes):

Cut Bank Gas Company: Supplies natural gas to Cut Bank; approximately 80 percent of its gas is purchased from the Montana Power
Company/North Western Energy.

Shelby Gas Association; Supplies natural gas to Shelby, gas is purchased from the Montana Power Company/North Western Energy.

Saco Municipal Gas Service: Supplied natural gas to Saco from the town's own wells

Consumers Gas Company Supplied natural gas to Sunburst and Sweetgrass; gas was purchased from the Montana Power Company
and J.R Bacon Drilling Company through the Treasure State Pipeline Company.

After 1991 , Saco no longer reported any numbers and Consumers Gas was bought out by a municipal provider Thus, those two are no
longer added among "other utilities" No industnal numbers were given by any of these utilities after 1991

Some of the smaller gas utilities have experienced problems measunng actual gas sales volumes. Therefore, the figures tor these utilities
should be considered estimates.

In the year 2000. Shelby did not report

^ All gas sales from "Other" vary from utility to utility and from year to year, as indicated,

NOTE: Source documents from the Public Service Commission often report data at sales pressure rather than at a uniform pressure base When necessary,
the data were converted to the uniform pressure base of 14 73 psia at 60 degrees Fahrenheit using Boyles law

The source reports are for the companies' fiscal years ending during the year shown. Because reporting years vary from
utility to utility, the data represent various twefve-month periods and are, in that sense, not strictly comparable.

The Saco Municipal Gas Service and the Cut Bank Gas Company have reporting years ending June 30 The Shelby Gas Association's
reporting year ends September 30 The Consumer Gas Company, the Montana Power Company/NorthWestern Energy, and Montana-
Dakota Utilities use calendar year reporting periods

The Great Falls Gas Company used a calendar year reporting period through 1981, they filed a six-month report tor the
period January 1. 1982. through June 30, 1982. and then changed to a twelve-month reporting period ending June 30.

The 1982 figures were estimated by the sector averages from the 1981 and 1983 twelve-month reports. The 1983 figures and those for all
subsequent years are based on twelve-month reports ending June 30 of that year

SOURCE: Annual reports filed with the Montana Public Service Commission by the natural gas utilities (1950-00), supplemented by information
obtained directly from the utilities After 1993. schedule 35 of the annual reports of each utility was used.



III-21









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rsj



Chapter 4: Coal in Montana

The Montana coal industry exists to support the generation of electricity. All but a tiny fraction
of the coal mined in Montana eventually is converted to electricity. In recent years, over half
the electricity generated in Montana has come from coal-fired plants. Almost three-quarters of
the coal mined in the state is exported, primarily to Midwestern utilities. Even though new
generating stations built around the country in recent years have relied on natural gas or wind,
coal continues to provide the majority of the nation's electricity.

1. Production

Montana is the sixth largest producer of coal in the United States, with over 38 million tons
mined in 2000 (Table CI). Almost all the mining occurs in the Powder River Basin south and
east of Billings. With the exception of the small lignite mine at Sidney, Montana production is
entirely low-sulfur subbituminous coal, with around 18 million Btu per ton. Like most Western
coal, Montana coal is cleaner but lower in heat content than coal mined in the East.

Coal has been mined in Montana since territorial days, first as a heating fuel and later primarily
for the railroads. Production initially peaked in the 1940s at around 5 million tons (see Figure
CI). As steam locomotives were phased out, production declined, bottoming in 1958 (Table
C2).

Figure CI. Historical coal production



50



Million Short Tons




1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Source: United States Department of Energy, Energy Information Administration
(http://www.eia.doe.gov/cneaf/coal/statepro/imagemap/mt.htm)



IV- 1



That year, only 305,000 tons were mined, an amount equivalent to less than 1 percent of
current output. Output remained stagnant for a decade, maintained by production for a small
generating plant opened in Sidney in 1958 by Montana-Dakota Utilities. Production began to
grow again in 1968, when Western Energy Company began shipping coal from Colstrip to a
generating plant in Billings owned by its parent, Montana Power Company.

As Montana mines began supplying electric generating plants in Montana and the Midwest, coal
production jumped. Production in 1969 was 1 million tons; ten years later, it was 32.7 million
tons. Since the end of the 1970's, production has increased gradually to around 40 million tons
(Table C2; see Figure C2). Over the last decade, its modest increase in production allowed
Montana to more or less maintain its share of the U.S. market. In comparison most eastern
states lost market share during this decade, primarily to Wyoming. Western states other than
Wyoming followed a path similar to Montana, more or less maintaining market share. Over the
past decade Montana has produced a little less than 4 percent of the coal mined each year in
the U.S.

Figure C2. Montana production and average price



j1=; nnn it-tc nr\


'JO,UUU






40,000 -


/^ - -' ''^-'' "-


- $14.00


35,000 -


/ ^~~~^' ^


- $12.00


«■ 30,000 -

c




$10.00


Z 25,000 -
1 20,000 H
t 15,000 -


p :


c

-$8.00 r

CL

- $6.00


10,000 -




- $4.00


5,000 ;^^^


- $2.00


n




$0.00








/vT^ /ifc- /.Qj Vb oO o!^ pN ofo o% C3P> ci>
^ ^ ^ ^ ^ ^ 0^ ^ ^ ^ >^


o,'^ cJb cA c^

^ ^ ^ 4>


















1



Source: Table C2.



The price of Montana coal averaged $8.87 per ton at the mine in 2000 (Table C2); this includes
taxes and royalties. The price of coal has been on a downward trend since the early 1980's,
when the average price of coal peaked at $14.22 per ton ($22.10 in 2000 dollars). By 2000 that
price had fallen 60 percent in real terms. The decline in Montana prices mirrors the decline in
prices nationally.



IV-2



Most coal in Montana is mined on federal lands (Table C3; see Figure C3). A significant portion
also conies from Indian reservations. In 2000 about 60 percent of Montana coal came from
federal lands and under 20 percent from reservation lands.



Figure C3. Production by land ownership type



50,000
^ 40,000

2 30,000

â– a '

I 20,000

o

^ 10,000





,# ,# ^^^ ,# ^^ ,# ^^ ,# ,# # ^c?"^



â–¡ federal â– Indian â–¡ other



Source: Table C3



Montana had seven coal mines in operation in 2001 (Table C4). The largest were
Westmoreland's Rosebud Mine at Colstrip and Kennecott Energy's Spring Creek Mine near
Decker, each producing around 10 million tons per year. During the 1990's, the last Montana
mine producing less than 100,000 tons annually closed. A proposed new mine at that site, near
Roundup, is in the process of obtaining permits. No major new mines have opened since 1980,
though the West Decker and Spring Creek mines have expanded significantly.

Westmoreland is the largest producer in Montana, accounting for 44 percent of 2001
production. Kennecott is the second largest, accounting for 25 percent of coal production
outright and holding a half-interest in mines producing an additional 24 percent of Montana
coal. 2001 marked the passing of an era in Montana coalfields. With Westmoreland buying
Montana Power Company's Western Energy and MDU Resources Group's (Knife River Coal)
Savage Strip Mine, over 40 years of utility ownership of operating coalfields in Montana came to
an end. Utility production had been substantial. MFC, through Western Energy, was the 11'^
largest producer in the country in 1998.

2. Consumption

About 95 percent of the coal consumed in Montana is used to generate electricity. Montana coal
consumption has been more or less stable since the late 1980's, after Colstrip 4 came on line



IV-3



(Table C5). Minor amounts of residential and commercial heating and some industrial use
account for the remainder.

Almost all of Montana coal production is used to generate electricity (Table C6). In recent
years, about 74 percent has been shipped by rail to out-of-state utilities, about 9 percent has
been burned to produce electricity for in-state customers and about 15 percent had been
burned to produce electricity and shipped by wire to out-of-state utilities. Over the last decade,
Michigan, Minnesota and Montana have each taken about a quarter of all the coal produced in
Montana (Table C7; see Figure C4). The remaining quarter has gone to 21 other states, Canada
and overseas.

Figure C4. Destination for Montana coal




Minnesota n Montana n Other



Source: Table C7.

3. Coal Economics

The Montana industry, like the coal industry nationwide, has become more productive, with the
number of employees dropping even while the amount of coal mined increased (Table C8; see
Figure C5). Taxes on coal, despite decreases from historical highs, remain a major source of
revenue for Montana, with $32.3 million collected in state fiscal year 2001 (July 2000-June
2001). That is about one-third in nominal terms the amount collected in 1984. Coal severance
tax collections dropped due to changes in the tax laws that began with the 1987 Legislature
and due to the declining price of coal. While the tax rates vary based on a number of factors.



IV-4



the rate on most coal in Montana has dropped from 30 percent to 15 percent of price. This
drop in rates has had a bigger impact on tax collections than the drop in the price of coal. The
impact on levels of coal production is less clear. Production has risen modestly since the cut in
taxes and Montana has been able to retain almost all of its share of the national market.

While significant, Montana's output is dwarfed by Wyoming, which produced 31.6 percent of
the country's output in 2000. This is nine times as much coal as Montana produced. This
probably is due to a combination of physical factors that make Montana coal less attractive than
coal from Wyoming. Montana coal generally is more costly to mine because the coal seams
tend to be thinner— though still thick in comparison to eastern coal— and buried deeper than
seams in Wyoming. Moreover, Wyoming coal has slightly higher average Btu content and
slightly lower average ash and sulfur content than Montana coal.

Figure C5. Changes in Montana production, share of U.S. market and severance tax
collections



160.0



140.0



120.0



o
o



'i 100.0



80.0



60.0



40.0




o?> .o!>



:^ .cS^ .cP Al^



&)



C%- ,C%- ^cT .c,*" .cT .c,^"- ^c,^^ ^<r ^cT ^O^^



rvO



N"-' N"-' \^-^ N^-' N^-' N"



\-



-♦-nnined



%ofUS



coal tax



Source: Table C8.

The cost of transportation to distant markets may also affect the competitiveness of Montana
coal. Nearly all coal exported from Montana leaves on Burlington Northern Santa Fe lines. Some
is later transshipped by barge. Transportation costs can double to more than triple the
delivered cost of Montana coal bought by out-of-state generating plants. Though transportation
costs have fallen over the last fifteen years, the minemouth cost of coal has fallen faster,
making transportation a larger component of final cost. Coal shipped from the Powder River



IV-5



Basin (Wyoming and Montana) now has tine highest ratio of transportation cost to delivered
price, on a per ton basis, for U.S. coalfields. The cost of Montana coal may be further affected
by the rail transportation network being better developed in the southern end of the Powder
River Basin than in the northern end. (U.S. Department of Energy, Energy Information
Administration Energy Policy Act Transportation Rate Study: Final Report on Coal
Transportation, 2000).



IV-6



Table C1. Coal Production by State and Coal Rank, 2000 (Thousand Short Tons)







Bituminous


Subbituminous


Lignite


Anthracite


Total


Percentage of


Rank State


Production


Production


Production


Production


Production


U.S. TOTAL
















2000


1991


1


Wyoming


1,985


336,915






338,900


31.6%


19.5%


2


West Virginia


158,257








158,257


14.7%


16.8%


3


Kentucky


130,688








130,688


12.2%


15.9%


4


Pennsylvania


70,046






4,572


74,619


7.0%


6.5%


5


Texas


180




49,319




49,498


4.6%


5.4%


6


Montana




37,980


372




38,352


3.6%


3.8%


7


Illinois


33,444








33,444


3.1%


6.1%


8


Virginia


32,834








32,834


3.1%


4.2%


9


North Dakota






31 ,270




31,270


2.9%


3.0%


10


Colorado


21.907


7,230






29,137


2.7%


1 .8%


11


Indiana


27,965








27,965


2.6%


3.2%


12


New Mexico'


6,156


21,167






27,323


2.5%


2.2%


13


Utah


26,656








26,656


2.5%


2.2%


14


Ohio


22,269








22,269


2.1%


3.1%


15


Alabanna


19,324








19,324


1 .8%


2.7%


16


Arizona


13,111








13,111


1 .2%


1 .3%


17


Maryland


4,546








4,546


0.4%


0.4%


18


Washington




4,270






4,270


0.4%


0.5%


19


Louisiana






3,699




3,699


0.3%


0.3%


20


Tennessee


2,669








2,669


0.2%


0.4%


21


Alaska




1,641






1,641


0.2%


0.1%


22


Oklahoma


1,588








1,588


0.1%


0.2%


23


Mississippi






902




902


0.1%


-


24


Missouri


436








436


0.0%


0.2%


25


Kansas


201








201


0.0%


0.0%


26


Arkansas


12








12


0.0%


0.0%


-


Iowa










~


-


0.0%


-


California










~


-


0.0%




East of Miss. River


502,043




902


4,572


507,517


47.3%






West of (Vliss. River


72,233


409,203


84,659




566,094


52.7%






U.S. Total


574,276


409,203


85,561


4,572


1,073,612


100.0%





'One mine in New Mexico produces both bituminous and subbituminous coal and Is double counted as a
bituminous and subbituminous mine, but is not double counted in the total.

Notes: Coal production excludes silt, culm, refuse bank, slurry dam, and dredge operations except for Pennsylvania
anthracite. Totals may not equal sum of components due to independent rounding.
Total U.S. coal production increased 8.1% between 1991 and 2000.

Sources: U.S. Deparlment of Energy, Energy Information Administration, Coal Industry Annual 2000 (EIA-0584)
and Coal Production 1991 (EIA-0118).



IV-7



Table C2. Montana Coal Production and Average Mine Price by Rank of Coal, 1950-2000





PRODUCTION (th


jusand short tons)


AVERAGE MINE PRICE (dolla


s per shor


Year


Subbitumlnous


Lignite


TOTAL


Subbituminous


Lignite


AVERAGE


1950


2,488


52


2,520


$2.30


$3.37


$2.33


1951


2,310


35


2.345


2.61


3.51


2.63


1952


2,039


31


2,070


2.80


3.70


2.81


1953


1.848


25


1,873


2.64


3.77


2.66


1954


1,491


NA


1,491 E


2.79


NA


NA


1955


1,217


30


1,247


3.01


3.82


3.03


1956


820


26


846


4.11


3.70


4.10


1957


387


26


413


5.33


3.80


5.23


1958


211


94


305


5.94


2.34


4.84


1959


152


193


345


7.06


2.08


4.28


1960


113


200


313


6.87


2.06


3.79


1961


97


274


371


6.76


2.01


3.26


1962


78


304


382


6.90


1.99


2.98


1963


53


290


343


7.51


1.95


2.82


1964


46


300


346


7.40


1.95


2.68


1965


63


301


364


7.24


1.96


2.88


1966


91


328


419


7.10


1.96


3.08


1967


65


300


365


NA


NA


NA


1968


189


330


519


3.12


1.89


2.33


1969


722


308


1,030


2.18


2.03


2.13


1970


3,124


323


3,447


1.83


2.13


1.86


1971


6,737


327


7.064


1.79


2.27


1.82


1972


7,899


322


8,221


2.01


2.45


2.02


1973


10,411


314


10,725


2.83


2.60


2.82


1974


13, //b


331


14,106


3.91


3.00


3.90


1975


21,620


520


22,140


5.06


5.04


5.06


1976


25.919


312


26,231


NA


NA


4.90


1977


29.020


300


29.320


NA


NA


5.30


1978


26,290


310


26.600


NA


NA


7.37


1979


32.343


333


32,676


w


w


9.76


1980


29,578


369


29.948


w


w


10.50


1981


33.341


204


33,545


w


w


12.14


1982


27,708


174


27,882


w


w


13.57


1983


28,713


211


28,924


w


w


14.22


1984


32,771


229


33,000


w


w


13.57


1985


33,075


212


33,286


w


w


13.18


1986


33,741


237


33,978


w


w


12.93


1987


34,123


277


34,399


w


w


12.43


1988


38.656


225


38,881


w


w


10.06


1989


37.454


288


37,742


w


w


10.27


1990'


37,266


230


37,616


w


w


9.42


1991


37.944


283


38.227


w


w


10.76


1992


38.632


248


38,879


w


w


10.20


1993


35,626


291


35,917


w


w


11.05


1994


41,316


323


41,640


w


w


10.39


1995


39.153


297


39,451


w


w


9.62


1996


37,635


256


37,891


w


w


9.96


1997


40,763


242


41,005


w


w


9.84


1998


42,511


329


42,840


w


w


8.25


1999


40,827


275


41,102


w


w


8.82


2000


37,980


372


38,352


w


w


8.87



NA - Not Available E - Estimated value w - Withheld to avoid disclosure of individual company data

' The 1990 total includes 120.000 tons of bituminous coal.

NOTES: For 1997 and before, average mine price is calculated by dividing total free on board (fob,) mine value of coal produced by total production For 1998
and lonward. average mine price is calculated by dividing total f o b. rail value of coal sold by total coal sold. Excludes silt, culm, refuse bank, slurry dam and
dredge operations. Excludes mines producing less than 10,000 short tons, which are not required to provide data

SOURCES: U S Bureau of lylines (1950-76); US Department of Energy, Energy Information Administration, (1977-78). U S Department of Energy, Energy
Information Administration, Coal Production, annual reports for 1979-92 (EiA-01 18),U.S. Department of Energy, Energy Information Administration, Coal Industry
Annual. 1993-2000 (EIA-0584) .



IV-8



Table C3. Coal Mining Acreage, Production and Royalties from Federal and
American Indian Leases in Montana, 1980-2000