Benefits, detriments of high gas prices debated

By SCOTT McMILLION, Chronicle Staff Writer

HELENA -- The rising price of natural gas is a sword that cuts two ways.

It slices into the meager income of Montana's numerous poor families. Yet at the same time it provides good paying jobs that can help build the state's tax base.

"A crisis for one party is a boon for another," said Sen. Emily Stonington, D-Bozeman. "That's a factor we all need to pay attention to."

Stonington spoke at the end of a daylong "Natural Gas Summit" here Wednesday. Sponsored by the Montana Public Service Commission and the Burton K. Wheeler Center at Montana State University, it attracted about 110 lawmakers, bureaucrats, economists, members of the public and representatives of energy companies and public interest groups.

Gas prices have been very volatile in recent years. They averaged $4.70 per thousand cubic feet last winter. The winter before, they averaged $2.20. The winter before that, when companies were shutting down and California had an electricity crisis, they averaged $6.20.

"Psychological influences are really driving the market right now, " said Mark Thompson, who is in charge of energy supply for NorthWestern Energy.

Chuck Linderman, with the Edison Electric Institute, noted that natural gas prices fell by about 50 cents recently when it became clear that Hurricane Isabel would miss the Gulf of Mexico and its giant gas facilities.

Natural gas and electricity prices are deeply entwined because nearly all of the nation's new electrical plants in recent years are powered by natural gas.

That boosts demand, which increases prices.

Nobody knows how much power bills will climb this winter, said Marla Larson, a PSC economist. Homeowner bills vary monthly, based on wholesale prices and weather severity, which affects both the wholesale price and the amount of gas consumed in a home or business.

Ken Costello, an economist who studies utility rates, said increases this winter won't affect most middle-income people too badly. But the poor could suffer.

People with net incomes of twice the poverty level -- about $17,000 yearly for a single person -- spend between 9 percent and 13 percent of their income on utility bills, said Pat Harper, of the American Association of Retired Persons. For those people -- and there are many thousands of them in Montana -- a $30 to $50 monthly bump in the power bill can be painful, she said.

Long term, gas prices are expected to remain in the $4 to $5 range, said Stephen Harvey, a former planning director for Enron Corp. who now tracks gas prices for the Bush administration.

And demand will grow steadily, from about 22 trillion cubic feet a year now to about 35 trillion cubic feet a year by the year 2025, Harvey said.

That means the country will need another 15,000 gas wells a year to meet that demand, said Ron Edelstein, of the Gas Technology Institute in Chicago.

Access to restricted or disputed land will be necessary, he said, and coalbed methane will play a key role.

"Clearly that means we'll have to move to new areas," he said.

The J.M. Huber Corp. is now trying to drill for coalbed methane in the Bozeman Pass area, but so far has been stymied in court by Gallatin County.

One independent gas man, Pat Montalban of Cut Bank, argued repeatedly for developing gas in coalbed methane country and along the Rocky Mountain Front, both hotly contested areas.

"We think Montana should be a strong energy producer," said Montalban, representing the Northern Montana Oil and Gas Association.

Doing so would produce hundreds of good jobs, increase the tax base and help end the state's economic doldrums, he said.

"We think coalbed methane should be developed in southern Montana," he said. "We think the Rocky Mountain Front should be drilled for oil and gas."

Scott McMillion is at scottm@dailychronicle,com

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