Paul Stephens PO Box 2501 Great Falls, Montana 59403 (406) 216-2711

August 30, 2006

Re: SME and the Highwood Generating Station, Cascade County, Montana

Richard Fristik
USDA Rural Development, Utilities Programs
1400 Independence Ave. SW
Mail Stop 1571, Room 2237
Washington D.C. 22050-1571


Richard.fristik@wdc.usda.gov

Dear Mr. Fristik,

I am a fourth generation resident of the Great Falls-Highwood area whose family first joined the Sun River Electric Co-op in 1945. I also hold a degree in Economics from UCLA. I am associated with the Citizens for Clean Energy group here in Great Falls, and an independent consultant under the name Green Solutions. I also endorse all of the findings and statements of the Montana Environmental Information Center (MEIC) submitted for this plant.

Since the mid-1970's, I have been aware of the problem of global warming caused by Carbon Dioxide (CO2) emissions and other so-called "greenhouse gases." The single greatest source of these is coal-fired power generation, along with other fossil fuel consumption, refining, and processing of petroleum and coal.

I'm writing to express my concerns about the proposed Highwood Generating Project and the draft EIS. As designed, the project would needlessly threaten public health and environmental quality by emitting thousands of tons of regulated air pollutants each year, and millions of tons of global warming pollution. The draft EIS failed to independently assess the real need for this project and the economic risks of becoming overly dependent on a single fossil-fuel based resource. The EIS also needs to properly analyze cleaner alternatives working in combination -- the so-called "balanced portfolio" of energy supplies emphasizing clean, renewable technologies.

Other developed, industrialized countries in the world with a similar or higher standard of living and quality of life use half or less fossil fuel per capita than we do in the United States. And among the 50 states, Montana has one of the highest per capita rates of CO2 production, even without counting that produced by generating electricity for export -- about half of our total generating capacity. Most other industrialized nations have already agreed to limit CO2 production -- the so-called "Kyoto Protocols" which are designed to absolutely decrease CO2 production by 10% or more by 2010 in the signatory countries. (In contrast, the Highwood Station alone will increase Montana's total CO2 emissions by about 7% - a direct violation of Kyoto and other climate mitigation strategies.) Only Canada and Australia use similar amounts per capita of fossil fuel (and thus produce C02), and both of those countries are now attempting to meet or exceed the Kyoto standards. China, India, and Russia have joined us in refusing to endorse Kyoto, but those countries use one-fourth or less fossil fuels per capita as we do, and they are amenable to agreements which don't put them at a relative disadvantage to countries which already pollute much more. If the United States was to join or advance this effort, the rest of the world would have to follow, or else face trade sanctions and other penalties which would quickly persuade them to join. In Europe, an $11/ton carbon tax is already in effect, virtually precluding further building of coal or other fossil fuel power generating plants which release most or all of their CO2 into the atmosphere.

Nearly all new generating capacity in Europe is provided by wind, with concomitant decreases in greenhouse gas production. Conservation and efficiency upgrades have already saved hundreds of thousands of megawatts in generating capacity, and they could save much more with passive solar building codes and the transition to "Hypercar" (Rocky Mtn Inst TM) and other hydrogen-fueled transportation systems, etc. And it is already cheaper to produce diesel fuel and gasoline from coal than it is to import it at current prices. Within a decade or two, fossil fuel consumption as a whole will likely be half or less what it is, today -- a consequence of carbon taxes and declining supplies, as well as the need to further limit greenhouse gas production. There is an overwhelming scientific and policy consensus on the need to minimize fossil fuel consumption, rather than following the industry projections of an ever-increasing reliance on coal and oil.

Instead of joining this laudable effort and acknowledging the role of fossil fuel consumption in global warming, our federal and state governments have fought it continuously, and several large corporations have spent 10's of millions of dollars sponsoring false science and disinformation campaigns. Since Hurricane Katrina a year ago, the mass media, the scientific community, and many national and regional environmental groups and state agencies have moved to reduce CO2 production by signing on with Kyoto or otherwise limiting greenhouse gas emissions voluntarily. Several states including California have independently adopted Kyoto standards or better to reduce the impact of global warming on their coastlines and agricultural production. Montana should actively pursue this issue in the next Legislature, and we are already promoting legislation and lining up sponsors.

Unfortunately, a number of air quality rules and standards have been changed by industry lobbying so that old plants don't need to be retrofitted or updated, and new plants of the old types of Pulverized Coal (PC) and Circulating Fluidized Bed (CFB) generating facilities are still being planned and built - often with subsidies, low-interest loans, and the active participation of agencies such as the Rural Utilities Services (RUS). Instead of encouraging rural electric cooperatives to become producer-cooperatives of distributed, farm-based renewable energy (wind, biomass, solar, etc.), they are funding more old-style coal plants which have proven to be environmentally disastrous and economically unsound, given the external costs of global warming.

We anticipate that all these agencies and standards will be reformed during the next few years to reflect the full costs of global warming and the health effects of pollutants such as mercury, lead, small particulates, Nitrous Oxide, Sulfur Dioxide, etc. It has become a political imperative, embraced by all parties and not to be denied by a few oil and coal companies which dominate the present Administration. When that happens, those who did not participate in the coal boom, nor invested heavily in these discredited technologies will prosper, while those who've spent decades worth of energy investments in coal plants such as the Highwood Station, will see their investments lost, in whole or in part.

Several of us have been researching these issues for months, years, or even decades. We have worked closely with the Montana Environmental Information Center, the Rocky Mountain Institute in Snowmass, CO, and other reputable scientific groups, and our findings are consistent with theirs, as well as United Nations, EU, and other multinational and global agencies.

We find it totally incomprehensible that this plant should have ever been proposed or planned as a "solution" to the state and federal deregulation debacle of our electric utility companies. These were legislative mistakes, sponsored and actually written, in most cases, by private corporations and industry associations in pursuit of their own private gain, not the public well-being and convenience. The process by which this happened was largely illegitimate, and even if we can't do much on the federal level to change or repeal these "de-regulation" policies, the State of Montana and the RUS can do a lot, within their own administrative and legal mandates, to minimize the damage which these industry-sponsored policies have brought about.

This DEIS for the proposed Highwood Generating Station ignores or denies nearly all of these considerations. If the SME co-ops really think they need to build some sort of coal plant somewhere in their service area, their best option, in our view, is to build a coal gasification and combined cycle gas turbine generator at one of the mineheads like Decker or Nelson Creek. This would supply their members with Diesel and natural gas, as well as provide peak and alternative power for distributed wind generators which could be co-operatively owned and built as income producers on member's farms and ranches. This would be true energy independence for the immediate and mid-term period (say, three decades, the projected lifespan of the Highwood Station). And it wouldn't require the water rights provided by the City of Great Falls, which is the only tangible reason why SME might have wanted to build a CFB plant, here. IGCC can use as little as 10-20% as much water per day (or per megawatt of power generation) as a CFB plant, and a lack of water is most of the reason why the Decker and Nelson Creek sites were rejected.

Therefore, we, the members of Citizens for Clean Energy and a thousand or more petitioners from this area respectfully request that you deny the permit for the Highwood Generating Station, refuse to fund or otherwise support the SME co-ops group in this plan, and start the whole process over with a public and scientifically reputable study of the future energy needs of this region, with due consideration for the property and legal status of those who already live and work here, and for those who presently supply us with our energy needs. We are also in touch with federal investigators who will carefully examine the business plans and transactions of the various parties involved for evidence of fraud, deceit, or corruption.

There are serious concerns about the manner in which two men, Mr. Gregori, the CEO of SME, and Mr. Lawton, the City Manager of Great Falls, have advanced this project against all reasoned opposition, fact-finding, and the protests of their own co-op members and the citizens of Great Falls. It has even been rumored that Mr. Gregori has purchased a villa in Tuscany, and Mr. Lawton anticipates a well-compensated seat on the Electric City Public Power entity which he created, among other "off the books" benefits. Some 14 different electric co-ops were initially involved in this process, but 9 of them withdrew and formed a new power buying and distributing group because they did not agree with Mr. Gregori's plans or methods. We also suspect that Alstom, the company which wants to build the Highwood Station, has unduly influenced or coerced executives and staff of SME and the City of Great Falls to buy their plant, even though it doesn't represent the best technology available or the best integrated energy solution for the co-op members or the people of Great Falls.

The five co-ops which remain associated with SME are centered around the coal fields and generating plants near Decker and Colstrip, Montana. These co-op members have already suffered from the effects of large-scale coal-fired power plants, and we who live in or near Great Falls object to them attempting to spread this same environmental desecration to our local environment. Very few co-op members in the Great Falls area will use any of this power, and it remains an open question whether or not the City of Great Falls will be able to sell any of their power to local residents, who are presently being supplied by Northwestern Energy as the default provider. The HGS has all the marks of a "merchant plant," which will export half or more of its generating capacity out of state or to Canada, which has a much denser population just north of the border in Alberta and Saskatchewan.

The only tangible benefits for the local economy and government agencies are some 65 permanent jobs, some local contracts to suppliers, and some $9 million in local property tax revenues which will be distributed amongst various local governments, schools, and tax districts. We feel that the financial risks and environmental and health effects of this plant far outweigh these few benefits, and we also fear that building the plant will result in a net loss of population of retirees and families with young children (both of whom suffer disproportionately from air pollution); it will discourage the long-sought "clean industry" from locating here; and it will have very negative effects on tourism and agriculture, as well. Although there isn't any real "economic impact statement" or "cultural and demographic impact statement" associated with this project, we need to know more about these things, and have these effects investigated by some impartial research group which is not in the pay of SME or the City of Great Falls. These issues are mentioned and largely passed over in the DEIS, which is contrary to the intent and purpose of most of the major environmental policy legislation of the past four decades.

We already know what the effects will be, and how the political process in Great Falls and Helena (the Governor's office and Legislature) has been subverted by industry lobbyists and staff members of the City of Great Falls and SME. It was part of our City Charter that any project like this would have to be voted on by the people. This ordinance was secretly changed, directly before (and finalized after) the last City election, in which these issues were suppressed, ridiculed, or dismissed by the City Manager and other interests. We will file lawsuits, hold recall elections, or whatever needs to be done to correct these abuses of power and the democratic process.

I believe in the value and mission of rural electric co-operatives as well as municipal public power authorities. Few if any in our group oppose the Highwood Station because
it is "public power" or part of a member-owned cooperative. It is precisely because it is someone else's cooperative, in a different part of the state, that we ask and demand that they distribute the benefits as well as the costs among their own members, and in their own region. As for the City of Great Falls and the Electric City Public Power entity, that is a problem we will have to solve for ourselves. This is only one of many boondoggles undertaken by Mr. Lawton and his cronies at our expense. We expect that he will resign or be dismissed shortly, and that his participation in this ill-fated venture will be annulled.

The balance of public opinion is swaying markedly against the Highwood Station, and we expect that our complaints will soon find recognition in the official policies of the City of Great Falls.

There may have been a place for a wind farm like Judith Gap, or even some co-op public power agency developed from the existing 5 hydro-electric dams in Cascade County plus wind and other renewable resources to make us energy self-sufficient. We plan to go forward with plans to repatriate the dams to their rightful owners -- the people of Great Falls and Montana. We understand that there are several different entities, including PPL, which have offered long-term supply contracts both to SME and the City of Great Falls. They have not recognized or pursued these options because of the two men named, who stand to financially gain much more from building this CFB plant. They may be in the pay of Alstom, as well. HGS proponents have also persuaded several labor organizations as well as Democratic legislators and other officials who are dependent on them to support this plant, regardless of the economic and environmental consequences.

Your job, as those in charge of the Montana Department of Environmental Quality and the Rural Utility Services, is to protect the citizens and taxpayers from gross misallocations and depletions of public resources, including the air, land, water, and climate which will be adversely affected by building additional coal-fired generating plants. We would suggest to SME, its members and rural customers, that they pursue, instead, a coal gasification plant at one of the mine sites mentioned in the DEIS. Such a plant could produce diesel fuel, gasoline, natural gas substitutes, as well as electricity without the vast water requirements of a CFB plant. It would also have the capability to provide "peaking power" according to a daily schedule to firm up wind resources, and provide a substitute when output from wind generators is not available. When there is adequate or surplus wind blowing, an IGCC plant could quickly switch to diesel or hydrogen production for local use, or to be marketed as additional income for the co-op. Hydrogen can also be generated by surplus wind power and burned directly as fuel or used in fuel cells. This is the energy future which most experts envision. The quicker we begin making the transition to a hydrogen economy, the better it will be for all of us.

Recently-released reports also indicate that the cost of photo-voltaic panels has been reduced by a factor of 4-5, making them highly competitive with grid-supplied electricity for most applications. Several large manufacturing plants are under construction, and within a few years, we may be able to start shutting down coal-fired plants and dismantling much of the electric grid. In that case, our local CFB plant would shut down, too, leaving investors, the co-ops, and the City of Great Falls insolvent.

In conclusion, this is the wrong plant in the wrong place at the wrong time. We urge an immediate moratorium on all permitting and construction of CFB and PC generating plants, and federal mandates and support for converting all existing coal generators to IGCC technology. There are two or more coal gasification facilities already proposed or under review in Montana, and nationally, some 20-30 of them. Governor Schweitzer has repeatedly voiced his support for clean, renewable energy as well as coal gasification plants, but he has also endorsed the Highwood Station and large-scale export of coal regardless of how it is used, elsewhere. We believe that these are contradictory and self-defeating positions, determined by political considerations rather than the technical or scientific merits (let alone health and environmental considerations). We strongly urge that he reverse these decisions, and support us in a clean and sustainable energy future for Montana.

Thank you for your consideration of these remarks.

Paul Stephens

Green Solutions

PO Box 2501

Great Falls, Montana 59403

greateco@3rivers.net

406.216.2711