Utah lawmakers try to calm clash between Kennecott, Rocky Mountain Power

Lawmakers may avert a battle royale between two of the state's largest companies — Kennecott Utah Copper and Rocky Mountain Power — after working out a potential solution Wednesday afternoon.

Both sides had been stockpiling lobbyists in anticipation of a drag-out fight over Kennecott's effort to trim its electrical costs by pulling itself off the Rocky Mountain grid and instead retrofitting its own power plant or buying electricity elsewhere.

It got to the point that Kennecott warned lawmakers that, if the company couldn't get the legislation it sought, it may shorten the life span of the massive mining operation that employs thousands of Utahns.

But the building tensions were substantially tamped down during meetings Wednesday afternoon where Rocky Mountain's biggest concern appears to have been addressed.

Senate Majority Whip Stuart Adams, R-Layton, released a bill Wednesday night to address Kennecott's concerns. He said negotiations were positive and he's hopeful outstanding issues will be resolved.

"It's been surprisingly good. I don't know if it will end good," he said. "We have two of the great corporate citizens that have been involved in all of our lives and communities and they're trying to work together. And we're sure they'll be able to resolve something that is positive for everyone involved and for our economy and our state."

Kennecott has been under severe pressure since an enormous landslide last April disrupted operations. Combined with a tight global market, Kennecott's parent company, Rio Tinto, has been forced to take a careful look at its future spending.

In December, Rio Tinto reported it was slashing its planned capital expenditures by more than half, to $8 billion.

It's with that backdrop that Kennecott went looking to cut power costs and squeeze out other efficiencies, warning legislators that the long-term life of one of Utah's oldest and largest economic engines might be cut short.

"They don't want to push public policy over a panic," Adams said.

Kennecott has been focusing all of its efforts in digging out from the mammoth landslide.

Kyle Bennett, a spokesman for the company, said it has moved 26 million tons of earth. The bad news: Another 100 million tons of material are left at the bottom of the mine and the company will not return to normal operations until 2016.

"There are a lot of uncertainties because what we're facing is really unprecedented," said Bennett.

Senate President Wayne Niederhauser, R-Sandy, said in earlier meetings with Kennecott representatives that they have laid out how Rio Tinto has to make decisions on where it invests its money long-term.

Without resolving its power-supply issue, the parent company is less likely to invest in Utah and commit to the future of the mine, he said.

"If they can address this issue of power, they can make some longer-term commitments to keep mining there and to the jobs that are important to our valley," Niederhauser said.

Without a resolution, how long and how deep the company would mine would be up in the air, said Adams.

"We're very concerned about that. We'd like to see a way to create a win-win solution," said Niederhauser.

So Adams' bill gives Kennecott the ability to generate 250 megawatts of its own electricity — which would require re-engineering its current power plant to be powered by natural gas — or either contracting with other providers or buying power on the market.

Rocky Mountain Power was concerned that, as a regulated monopoly, it is legally required to provide power to consumers in its area.

That could mean the power company could be forced to be a backup provider, which would mean keeping a huge reserve of power, at the expense to the company or possibly ratepayers.

Rocky Mountain also said Kennecott, the biggest power user in Utah, was using the threat of closing the mine as leverage to get its way with the Legislature and opening the door for other major energy users to go to the Capitol to cut similar deals in the future.

But the bill released Wednesday makes a "clean break," as Adams puts it, between the two and releases Rocky Mountain Power from any obligations to Kennecott. If that holds, both sides may be satisfied this session. If not, the battle may flare up again.

"We're not looking to lock horns with anybody," Bennett, Kennecott spokesman, said this week. "We're really trying to make sure we're a viable, long-term, financially stable business moving forward."