THE FUTURE OF COLSTRIP: The Economic Impact of the Early Retirement of Units 3 and 4.

• Author: Barkey, Patrick M.
• Position: RESEARCH

In July 2016, the owners of Units 1 and 2 of the coal-fired Colstrip Electric Generating Station in Rosebud County, Montana, agreed to shut those units down no later than July 2022. The agreement was reached as a settlement from a lawsuit alleging violations of the Clean Air Act brought by the Montana Environmental Information Center and the Sierra Club in 2013. While this agreement said nothing about the future of the two larger, newer generating units in operation at Colstrip since the 1980s, it underscored the seriousness of the challenges for coal-fired power plants in general--and Colstrip in particular --as they face a future of uncertain markets, technologies and policies.

While that future might be in doubt, there is no doubt that the path of actions and policies that frame the future have economic implications that extend well beyond communities such as Colstrip--that is particularly true for a state like Montana. Not only has the significant export of electrical power to neighboring states supported jobs, incomes and tax revenue in our state since the mid-1980s, but the outsized tax contributions of the coal industry to the revenue base of state government gives communities a stake in outcomes affecting Colstrip.

A Bureau of Business and Economic Research (BBER) study released in June 2018 examined the implications for the state economy of the early retirement of the Units 3 and 4 of the Colstrip Electric Generating Station. Early retirement is defined as a shutdown of the two units, which would complete the shutdown of the entire facility, earlier than their physical and economic viability would support. Such an action would be consistent with the goals of environmental groups such as the Sierra Club's Beyond Coal campaign, which advocates the closure of all coal power plants nationwide by the year 2027.

While earlier work by BBER has already documented the economic contributions of Colstrip, the circumstances have changed significantly for coal in general--and Colstrip in particular--since those studies were published. In the new policy landscape of 2018:

* The closure of Units 1 and 2 by no later than 2022 effectively lowers the economic baseline by which any policy choices concerning the two larger, newer units of the facility will be measured.

* The increased output of renewable energy producers, particularly solar producers, on regional markets has depressed wholesale power prices during the midday period, making it more...