Article published May 11, 2007

RUS approves Highwood Generating Station, but loan isn't in federal budget

A favorable “record of decision” today by the U.S. Department of Agriculture’s Rural Utilities Service opens the door for Southern Montana Electric Generation and Transmission to obtain a federal loan to finance 85 percent of a 250-megawatt coal-fired power plant east of Great Falls.

However, top RUS officials said President George Bush’s current budget proposal recommends no funding for new, base-load generation plants such as the proposed Highwood Generating Station.

“Until that issue is solved, the plant will not be funded,” said Jim Newby, RUS’ assistant administrator of electric programs.

It will be up to Congress to decide by Oct. 1 to provide the funding, he said.

Tim Gregori, the head of SME, said the decision affirmed the need of the plant to provide electricity and also showed that it meets all applicable state and federal environmental regulations.

In a statement, Citizens for Clean Energy, which opposes the facility, said the RUS decision was expected and will be appealed and fought in the courts.

RUS officials say they want the National Park Service and SME, the developer, to reach an agreement on mitigating the proposed plant’s impact on the historic Lewis and Clark Trail before funding is released. A portion of the trail, a national historic landmark, is within view of the plant.

Even without a mitigation agreement, Newby said RUS has the authority to fund the project. The record of decision says “additional stipulations” resolving potential adverse effects to the Great Falls Portage National Historic Landmark are being negotiated.

In the long-awaited record of decision, which was issued this morning, RUS and the state Department of Environmental Quality agreed that the Salem Road site eight miles east of Great Falls is the preferred alternative for the 250-megawatt power plant. The site also is the preferred location of SME.

The decision states RUS will fund a portion of the facility at the Salem Road site, assuming the loan is approved. Federal officials say they will now evaluate the financial and engineering feasibility of the plant before determining whether to issue a loan. That process will take a couple of months, they said.

The five rural cooperatives that make up SME originally were seeking a loan of $380 million, or 75 percent of the total construction cost. But the amount in the loan application has since gone up with the estimated cost of the plant, which is now around $720 million, federal officials said.

And the SME co-ops are now planning to cover 85 percent of the cost, based on revised load forecasts.

That means that the city of Great Falls, which was planning to finance 25 percent, will now cover 15 percent of the cost, City Manager John Lawton said. The lower percentage will reduce the city’s megawatts from 65 to 37, but Lawton said the city still would be able to purchase additional power from the plant if it needs to.

The decision says the DEQ will approve SME’s air quality permit application, with stipulations, and a solid-waste-management license.

The big change in the final air permit is that it requires SME to install additional mercury control equipment above and beyond its regular pollution controls, said Dave Klemp, the DEQ’s permitting program manager in the agency’s permitting and compliance division.

The public has 15 days to appeal the air-quality permit, Klemp said.

SME currently serves 65,000 customers and could reach up to 120,000 with power produced at Highwood. Those customers live mostly in rural areas between Great Falls and Billings. SME moved to build the power plant when it learned it would be losing its principal supply of power from the Bonnevile Power Administration beginning in 2008.