NW Energy Unsure On Future Energy Costs

MONTANA, Apr 17 2008 (Neo Natura) - NorthWestern Energy Corp. told regulators Wednesday that rising fuel costs and the potential for carbon taxes are making it difficult to map the utility's energy future.

The Public Service Commission is reviewing the company's plan for buying electricity in the coming years. NorthWestern wants to get back into the energy production business that was lost during deregulation and the transformation from the old Montana Power Co.

But NorthWestern says it is hard to predict what will happen with carbon rules in Congress. Such rules, and the potential for a special tax, could impact decisions in trying to find the cheapest power sources for Montana consumers.

The company says the tax, and rising fuel costs, mean that Montanans will likely be paying more for electricity in coming years regardless of what is done.

"You are attempting to make a forecast predicting, when you have no idea what is going to happen," said commissioner Doug Mood. "We ought to be warning people in this state that we have no idea what is going to happen to the price of electricity."

Currently, NorthWestern does not have its own electricity production. The cost that NorthWestern pays for electricity, from such companies as PPL Montana, a unit of PPL Corp., is largely passed onto consumers.

John Hines, NorthWestern's chief supply officer, said the company is phasing in more long-term contracts out past five years as a way to steady market turmoil.

Hines said the company is carefully taking "baby steps" toward building its own energy production to further steady energy prices. It could take 20 years or more to become "fully integrated."

Such a move was allowed by legislation last year that undid some of the state's so-called deregulation laws of the 1990s. Deregulation banned the utility from also owning the power production.

Hines said there is an "incredible amount of risk" until then because the company will be subject to the cost of power on the open market.

Commissioner Ken Toole told the company that he believes there are strategies, such as conservation, that could mitigate the risk of fuel prices.

Other commissioners also talked about the need to develop resources that don't use fossil fuels, such as geothermal and compressed air storage.

Commissioner Chairman Greg Jergeson said he is critical of Northwestern for not analyzing the possibility of allowing the utility arm of the company to buy the corporate parent's interest in a Colstrip coal-fired power plant - which NorthWestern is considering selling.

Jergeson said that plant could provide valuable energy and help the utility.

"I think there are ways they could make that a valuable rate-based asset in their portfolio," he said.

The PSC will offer written comments in the plan in a couple of months, which will help the company make decisions down the road, Jergeson said.

Invenergy Plans 52MW Wind Farm

MONTANA, Apr 15 2008 (Neo Natura) - The owner of Montana’s largest operating wind farm, near Judith Gap, has proposed adding 35 1.5MW wind turbines, which would increase its power-production capacity nearly 40 percent, officials at NorthWestern Energy have confirmed.

Invenergy, based in Chicago, has pitched the expansion to NorthWestern, the utility buying the electricity currently produced by the wind farm north of Harlowton in central Montana.

NorthWestern should decide soon whether it wants to buy power that would be produced by the additional turbines, said John Hines, chief supply officer for NorthWestern. “We’re evaluating their offer and looking at it (versus) other electricity portfolio alternatives,” he said Thursday.

NorthWestern has 320,000 customers in Montana, and obtains most of its wholesale electricity on the open market or through long-term contracts with energy producers, such as Invenergy. That power is then sold to NorthWestern’s residential and business customers across Montana.

Invenergy, which operates the 135-megawatt wind farm, did not return a message seeking comment.

Under its 20-year contract to sell power to NorthWestern, Invenergy must give NorthWestern the first shot at buying electricity from any expansion up to 188 megawatts.

If NorthWestern turns down the offer, Invenergy can sell the power somewhere else, but not for a lower price than offered to NorthWestern, Hines said.

Hines said Invenergy is proposing to add 52.5 megawatts of production to the wind farm, or 35 new turbines. Each turbine can produce up to 1.5 megawatts of power. The project currently has 90 turbines, each of which is a large tower with a single blade.

The Judith Gap expansion is one of many Invenergy has planned for 2009. The energy company plans to secure 800 MW of wind turbines for 2009 projects in both North America and Europe.

GE Energy will provide an additional 600 megawatts (MW) of wind turbines to Invenergy Wind LLC for its 2008 projects in the U.S. and Canada. This order, which brings the total to 1,200 MW of GE 1.5-MW wind turbines for Invenergy projects over the next two years, replicates Invenergy's order last fall for projects planned for 2007.

One megawatt of wind power provides enough electricity for 240 to 300 homes.

At 135 megawatts, Judith Gap is the only major wind-power project in Montana.

NorthWestern is paying about $30 per megawatt-hour for electricity purchased from the Judith Gap wind farm, which began operating in 2006. Other costs associated with the power increase the bill to about $38 per mwh, but those costs are projected to increase this year, NorthWestern officials have said.

The cost is considerably less than the $56 per mwh that NorthWestern is charging customers for its “portfolio” power, which is electricity from a variety of sources, purchased on the market.

NW Energy Small Wind Farm Tax

MONTANA, Apr 15 2008 (Neo Natura) - Developers of small wind-power projects in Montana have their eyes on the Public Service Commission this week, as it may decide a crucial price issue affecting their ability to succeed.

NorthWestern Energy, the state's dominant electric utility and the primary purchaser of wind power in Montana, wants to charge small wind farms for the cost of “integrating” their power into the NorthWestern system, which serves 320,000 customers.

The utility says if wind-power developers don't pay that cost, then NorthWestern consumers end up absorbing it.

“To have a cost shifted to ratepayers, I don't think is in their best interest,” says John Hines, chief supply officer for NorthWestern.

Yet developers of small wind-power projects that sell, or hope to sell, to NorthWestern say the company hasn't shown that those costs really exist.

And even if some costs do exist, they're less than the charge NorthWestern wants to levy, developers say - a charge they say would make it all but impossible to do business in Montana.

“If they end up with (a charge) the way NorthWestern has proposed, it's a serious impediment and it doesn't reflect the cost of those smaller generators,” says Bill Pascoe, a Butte consultant who works with wind-power developers. “My view is that it's very damaging to small producers.”

The PSC, the five-member body that regulates utilities in Montana, could decide Tuesday whether and how NorthWestern can charge these small projects for integration costs.

Put simply, integration costs are what the utility believes it must pay for additional power to balance the intermittent nature of wind power.

Because wind-power production occurs only when the wind blows, NorthWestern or any electric-system operator says it must buy what it calls “regulating power” to keep the system within a certain range of voltage.

The cost of that regulating power, which must be available at all times, should be charged to wind-power producers, NorthWestern says.

NorthWestern wants to base the integration charge for small producers on what it says are the costs of buying regulating power for the state's largest wind farm, the 135-megawatt Judith Gap project north of Harlowton.

Under that proposal, small wind-power producers would pay anywhere from $8 to $22 per megawatt-hour of power produced.

Two Dot Wind, the operator of 33 small wind turbines in central Montana, has challenged this charge as unjustified and exorbitant.

NorthWestern buys power from these small wind projects at about $50 per megawatt-hour - a price the producers point out is already below market value and below what NorthWestern customers pay for electricity.

Taking $8 to $22 out of that price for integration costs is not only unfair and unjustified, but also would essentially halt all future small wind-power development in Montana, says Mike Uda, the attorney for Two Dot Wind.

“If the commission wishes to drive wind development out of the state of Montana, then it should by all means adopt NorthWestern's proposal,” Uda wrote in arguments submitted March 27 to the PSC.

Two Dot Wind and others say the costs of integrating small projects' power is negligible, if anything, and certainly should not be calculated based on the cost of one, large project like Judith Gap.

Pascoe earlier proposed that the PSC order NorthWestern and small producers to collaborate on a study that examines the cost of integrating power from multiple small projects.

NorthWestern has ignored this request, and said the only question is how much integration costs Two Dot Wind or other small producers should pay.

“It's not NorthWestern customers' responsibility to make a business venture work,” Hines says of the small producers' claims. “We're not asking developers to subsidize ratepayers, but we're not asking ratepayers to subsidize (small producers) either.”

New Wind Plant For Butte

MONTANA, Apr 10 (Neo Natura) - Governor Brian Schweitzer, along with Joachim Fuhrlander, CEO of German wind turbine manufacturer Fuhrlander, announced that the company will construct a manufacturing plant in Butte, MT to assemble 2.5 MW wind turbines to serve wind farms throughout Montana and other parts of the western United States.

“Montana’s on the move. I am very pleased that Fuhrlander Company, a growing wind turbine manufacturer, has identified Montana as the place to locate a production and assembly facility,” Schweitzer said about the announcement. “Montana’s business-friendly environment, along with our vast potential for wind energy development, make our state the natural choice for this level of investment.”

Construction of the plant, which will be located in Butte, is set to begin in the fall of 2008 and is initially estimated to employ 150 people. Plans to potentially expand into labor-intensive blade manufacturing at the Butte site could result in an additional 600 jobs in the future. The blades are 150 feet long and the turbines are 2.5 MW in size.

“This $25 million project will bring jobs and tax base to Butte and is largely a result of our ‘clean & green’ energy incentives,” said Governor Schweitzer, who has been recognized nationally as a leader in innovative energy ideas.

Fuhrlander began conversations with Governor Schweitzer and state officials in early 2007 while considering several U.S. locations.

“When I met with Governor Brian Schweitzer and all his highly qualified team in Montana, I could see all the opportunities for education and training, cooperation with universities, the infrastructure and the market, it was clear, that we had to do more than only to sell wind turbines. Now we have decided to install a manufactory line for the turbines,” said Joachim Fuhrlander.

The jobs will be in mechanical, electric and electronic work, welding, steel work, metal work, accounting, office work and marketing.

Montana currently has about 50 wind power projects in various stages of discussion that could total over 4,000 MW of wind energy.

USGS Releases Bakken Report

MONTANA, Apr 10 (Neo Natura) - North Dakota and Montana have an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in an area known as the Bakken Formation.

A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency's 1995 estimate of 151 million barrels of oil.

Technically recoverable oil resources are those producible using currently available technology and industry practices. USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources.

New geologic models applied to the Bakken Formation, advances in drilling and production technologies, and recent oil discoveries have resulted in these substantially larger technically recoverable oil volumes. About 105 million barrels of oil were produced from the Bakken Formation by the end of 2007.

The USGS Bakken study was undertaken as part of a nationwide project assessing domestic petroleum basins using standardized methodology and protocol as required by the Energy Policy and Conservation Act of 2000.

The Bakken Formation estimate is larger than all other current USGS oil assessments of the lower 48 states and is the largest "continuous" oil accumulation ever assessed by the USGS. A "continuous" oil accumulation means that the oil resource is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences. The next largest "continuous" oil accumulation in the U.S. is in the Austin Chalk of Texas and Louisiana, with an undiscovered estimate of 1.0 billions of barrels of technically recoverable oil.

"It is clear that the Bakken formation contains a significant amount of oil - the question is how much of that oil is recoverable using today's technology?" said Senator Byron Dorgan, of North Dakota. "To get an answer to this important question, I requested that the U.S. Geological Survey complete this study, which will provide an up-to-date estimate on the amount of technically recoverable oil resources in the Bakken Shale formation."

The USGS estimate of 3.0 to 4.3 billion barrels of technically recoverable oil has a mean value of 3.65 billion barrels. Scientists conducted detailed studies in stratigraphy and structural geology and the modeling of petroleum geochemistry. They also combined their findings with historical exploration and production analyses to determine the undiscovered, technically recoverable oil estimates.

USGS worked with the North Dakota Geological Survey, a number of petroleum industry companies and independents, universities and other experts to develop a geological understanding of the Bakken Formation. These groups provided critical information and feedback on geological and engineering concepts important to building the geologic and production models used in the assessment.

Five continuous assessment units (AU) were identified and assessed in the Bakken Formation of North Dakota and Montana - the Elm Coulee-Billings Nose AU, the Central Basin-Poplar Dome AU, the Nesson-Little Knife Structural AU, the Eastern Expulsion Threshold AU, and the Northwest Expulsion Threshold AU.

At the time of the assessment, a limited number of wells have produced oil from three of the assessments units in Central Basin-Poplar Dome, Eastern Expulsion Threshold, and Northwest Expulsion Threshold.
The Elm Coulee oil field in Montana, discovered in 2000, has produced about 65 million barrels of the 105 million barrels of oil recovered from the Bakken Formation.

Montana Ranked 2nd In Oil Expansion

MONTANA, Apr 08 (Neo Natura) - Montana is currently the second fastest state to expand in oil recovery. New York takes the lead with an average 133% expansion in U.S. oil production in the last 5 years. Pennsylvania took 3rd as it's oil production grew 76% in the same period.

In 2002 Montana produced 46,000 barrels of oil per day. In 2003 Montana produced 53,000b/d. In 2004 Montana produced 68,000b/d. In 2005 Montana produced 90,000b/d. In 2006 Montana produced 99,000b/d. This gives Montana a 115% increase in oil production from 2002 to 2006. In 2006 Montana ranked 7th in the nation for inland oil production.

New Natural Gas Interstate Pipeline

MONTANA, Apr 07 (Neo Natura) - Midstream energy firms Alliance Pipeline and Questar Overthrust Pipeline have entered into a memorandum of understanding to develop the Rockies Alliance Pipeline, a jointly owned interstate natural gas pipeline from Wamsutter, Wyoming, to the Emerson trading hub on the US-Canadian border in Minnesota.

The proposed 42-inch pipeline will traverse approximately 800 miles through the US states of Wyoming, Montana and North Dakota, connecting the Rockies natural gas producing region with natural gas markets in the US Midwest and central Canada.

The Rockies Alliance Pipeline (RAP) is proposing to interconnect with downstream pipelines to provide direct access to the Chicago Hub, Michigan and Dawn storage facilities, and upper Midwest and Northeastern markets in the US.

RAP reportedly provides maximum receipt flexibility to access the growing gas supplies in the Rocky Mountain region originating in the Wamsutter Hub as well as the Powder River Basin area. RAP also provides multiple delivery options and will offer zonal rates with the various interstate pipelines.

Alliance and Questar will work with prospective shippers to determine the most efficient size, route and timing of in-service date for the RAP facilities.

The Rockies Alliance project is one five pending pipeline proposals in Wyoming. Four of those would carry gas westward to California, said Brian Jeffries, executive director of the Wyoming Pipeline Authority. A sixth project, the Rockies Express, is under construction with plans to begin moving gas eastward by this summer. More than 50 per cent of Wyoming's tax and royalty revenues are based on natural gas, he noted.

The companies are targeting the fall of 2011 for opening the entire length of the pipeline, pending financing and regulatory approval.

Air Force Considers Montana CTL Plant

MONTANA, Apr 07 (Neo Natura) - Although the Air Force program is currently purchasing gas-to-liquids synfuel purchased overseas, they are pushing for a CTL facility to be built in Montana. While coal is plentiful in the American West, natural gas is far too precious in the North American market to be used as the input for F-T conversion. McClatchy's Air Force leads push to liquefied coal fuel (March 30, 2008) tells the story—

With every $10 rise in the price of a barrel of oil costing the Air Force $600 million, the service is converting its entire 6,000-plane fleet to run on a synthetic fuel mixture. Tentative plans call for construction of a coal-to-liquid fuel plant at a Montana air base.

Air Force officials have been testing synthetic fuels based on coal or natural gas. They plan to certify the fleet of nearly 6,000 aircraft to fly on a 50-50 blend of synthetic fuel and traditional petroleum-based jet fuel by 2011.

Assistant Air Force Secretary Bill Anderson said the search for affordable, cleaner-burning alternative fuels was driven by economic and national-security concerns.

Let's state the obvious up front—the Air Force is surely "peak oil aware." Branches of the military and the intelligence services do scenarios planning. "The United States would be all but powerless to protect the American economy in the face of a catastrophic disruption of oil markets, high-level participants in [Oil Shockwave] concluded yesterday."

Even without a large oil shock like those of the 1970s, relentless price increases and the possibility of declining global liquids output leading to supply shortfalls in the U.S within the next decade has led the Air Force to the coal-to-liquids solution. If the Air Force thought we were going to be swimming in oil by 2016, their target implementation date, they would not be proposing using F-T to meet their jet fuel needs.

Many obstacles stand in the way of the Air Force's plan. The climate change lobby is not going to roll over on the issue, which creates a bad precedent and provides momentum for carbon-intensive F-T operations in the United States. "I think across the board there is going to be opposition from the environmental movement," said John Topping, the president of the Climate Institute in Washington. "I'd say it's going to be almost universal because of the climate concerns" (McClatchy). The Congress will probably have a Democrat majority after the fall elections. This likely means tough sledding for the Air Force.

As awareness of the climate problem grows in the United States, the economic squeeze brought on by higher oil prices creates pressure to implement supply-side solutions to alleviate soaring diesel fuel costs.