High prices and rising concern about U.S. dependency on foreign oil have helped fuel new enthusiasm in Helena for promoting greater development of Montana's vast coal reserves. The state has some legitimate claim to being the “Saudi Arabia of coal,” but the extent to which those coal reserves will be developed remains a burning question.
The fact that “coal development” recently became partisan fighting words suggests some likelihood the coal may remain in the ground for some time to come.
Not everyone shares the governor's vision. At their recent state convention, Republicans rallied as Secretary of State Brad Johnson lashed out at the governor for promoting the wrong kind of coal development. The GOP, it seems, prefers more conventional use of coal - burning it in new, state-of-the art plants to produce heat and steam to power electricity-generating turbines.
It probably doesn't matter what Democrats or Republicans think is the best use of coal. State government owns coal, sells coal but doesn't use coal. It's going to be up to utilities and energy companyies, bankers and investors to decide the best way to make a buck with coal. What matters a great deal, however, is how much Montana politicians tussle over the subject. Turning coal into a political football may be the best way to deter expansion of coal production.
Coal is a fuel that makes economic sense only on a large scale. Even relatively small-scale coal-fired generating plants can easily cost hundreds of millions of dollars, and the coal-to-liquid plants the governor favors likely would cost billions. These are long-term investments that require years to fire up and many years to reap the payback. Significant expansion of Montana's coal industry also would require tremendous investment in infrastructure, such as rail lines and water supplies. Energy prices tend to be volatile - rising and falling dramatically and sometimes unpredictably - so, these investments carry no small amount of risk.
The last thing a company or investor wants on top of that market risk is political risk. That raises the prospect that opportunities and regulations and profit potential could change with every election. Amid that kind of risk, prudent investors are likely to look elsewhere.
Montana has a lot of coal, but also certain disadvantages in seeking to exploit its reserves. For example, isolation and limited, relatively uncompetitive rail service makes it harder to market coal to the nation's utilities. Much of Montana's coal is buried deeper in the earth than it is in the West's other major coal-producing state, Wyoming. Montanans also guard somewhat more jealously their environmental quality than folks in Wyoming.
These and other disadvantages can be overcome to unleash a brighter future for coal in Montana. It's not certain how much our politicians can actually help grow the industry with their enthusiasm, but we're pretty sure the injection of partisan politics into the economics of coal would become another major disadvantage.
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