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Natural Gas, a Montana Tragedy


As you well know, natural gas prices are skyrocketing which is not bad news for everybody.

But natural gas prices are not good news for the Montana public that was recently robbed of their access to regulated and affordable natural gas.

And right now, in the grip of a prolonged cold spell, when 10 above zero sounds balmy, many in the Big Sky are dreading
the arrival of utility bills in the mail.

And why is that?

Well the $30 dollars worth of natural gas you paid for in the year 2000 is now costing you $75. And if the crystal balls in Texas who keep track of the BTU numbers are right, that same $30 worth of natural gas Montana people purchased in 2000 could be $100 within a year, just in time for the upcoming winter of 2006 -2007.

And that is quite a jump, one that would have been undreamed of in the good old days before deregulation. Of course that is how the good old days are measured now in Montana–before and after deregulation.

Of course, Montana deregulation promised us something different. Like marketplace competition and lower prices. But what Montana deregulation delivered was, and will be, is a Big Sky nightmare. And one that is not going away anytime soon..

And a needless nightmare at that.

Prior to deregulation, Montana produced twice as much power as it could use, had the sixth lowest prices in the nation, and Montana Power had a duty to serve Montana. In other words there was no problem to fix or no need for deregulation.

So, to tell this little story, and this is only the natural gas part of it, we will return to the year 2000 and the giddy days of Montana deregulation, a time when the greedy yuppies of the new economy running our old power company were selling the horses in the barn.

As CEO Bob Gannon kept saying: “The industrial age is over, The information age is here. It’s a total transformation. That’s literally what is happening and we happen to be in a position to be a part of that.”

So without a blink of an eye, Gannon and chums sold off the Montana Power’s extensive natural gas holdings, assets which had been built up over 60 years

Of course they were backed in this by the Montana Power Board of Directors, the Butte Local Development Corporation, the Montana Chamber of Commerce, D.A. Davidson, as well as then governor Marc Racicot and a notoriously corrupt, incompetent and lobbyist ridden majority in the state legislature.

(At this point, it should be noted that, as Montana Power was built by the Anaconda Copper Company for the Butte mines and Anaconda and Great Falls smelters, PanCanadian was created as the energy corporation of the Canadian Pacific Railroad about the time our now vanished power company was coming together in the early days of the 1900’s. But unlike Montana Power, PanCanadian stayed in the business they were in and are still around.)

Thus, on August 29, 2000, PanCanadian agreed to buy the natural gas business of the Montana Power Company for $475 million in chump change, a sum that soon disappeared in a high tech something in Butte called Touch America.

All in all, it was a very small sum for the Canadians, the proverbial 30 pieces of silver or less going to Touch America.

And, it will do well to remember at the time, CEO Gannon and his buddy Racicot were in a very big hurry to get the money to keep Touch America afloat. But there was another and even bigger reason behind the haste.

For the Pan Canadian sale was immediately followed by the Montana Power’s Board of Directors authorization of a 6.6 million share buyback of their own stock.. The decision cost the company $255 million; the purchased shares now valued at about $10 dollars or so. In other words the Montana Power management was so desperate for cash to keep afloat until the Initial Public Offering promised by Wall Street, that it was selling its own stock at a discounted price.

And that problem was turning into a two-edged sword. As the Wall Street Journal’s Bill Richards would later report “Mr. Gannon and others say Goldman’s bankers warned that the IPO market was losing its luster and urged them to sell their power-making assets quickly to get the best price.”

In other words, for the Montana Power management to cash in on the expected IPO windfall, the Wall Street investment bankers ruled they had to sell off all their utility assets which provided their only cash flow.

Well here we are today and much of what happened since has been lost to us in sealed records of a Delaware bankruptcy court.

But what we do know is that in January of 2005 Morgan Stanley and Goldman Sachs agreed to pay $40 million each to settle federal charges that they awarded coveted initial public offering shares in a manner that may have artificially pumped up stock prices during the late 1990s.

The SEC complaint said that “in the late 1990s, share prices of technology IPOs, many of them brought to market by Morgan Stanley and Goldman Sachs, often skyrocketed in the first few days of trading, providing quick riches to share recipients who sold before the bubble began to burst in early 2000. Investors who bought into OVERRATED IPOs in the aftermarket and held onto the shares as the market fell lost billions of dollars.”

But if there were billions of dollars lost by investors, there was other big money to be made by the bankers. Records show that in the 20 months between November 1998 and July 2000, three firms, Goldman Sachs, Morgan Stanley Dean Witter,
and Credit Suisse First Boston each pocketed more than $500 million in underwriting fees from IPO’s. Overall, during that same time span, high-tech underwriting as a whole brought in close to $1 billion for each bank.

But as Bob Gannon had said: “The information age is here. It’s a total transformation.”

So if you wonder why they are always laughing on Wall Street, I can guarantee you that there will never be a shortage of Bob Gannons and other such sheep to be sheared by the New York sharpies.

But even here Gannon and the gang were far behind the eight-ball.

It turns out that by the time Touch America got its house in order to the satisfaction of the Wall Street investment bankers, the bubble had burst. For the “irrational exuberance” as Alan Greenspan had described was gone before Touch America made its much anticipated IPO killing.

And Touch America, which had never – not even for one minute–been a legitimate business, was left to die on the cross by the New York bankers. Even worse, and I cannot emphasize this statement enough, Montana’s entire financial foundation had been ruined.

But don’t look for explanations because that isn’t how they do things on Wall Street. As, in all such settlements or charges and lawsuits filed, neither Morgan Stanley nor Goldman Sachs admitted or denied wrongdoing nor do they ever comment on regulatory matters.

But if the deal was good for Wall Street and a catastrophe for Montana, it turned out to be a bonanza for the Canadians.

What PanCanadian got was lucrative Montana Power gas field properties in not just Montana, but in Alberta, British Columbia, Saskatchewan Colorado, Oklahoma and Wyoming as well..

And, as an additional throw-in bonus, the PanCanadians also got three solid gold money making gas pipelines as it turned out, pipes that link Alberta and Saskatchewan to Montana, giving PanCanadian and now EnCana, even more valuable access to US markets.


A year after the 2000 sale (on Sept. 2001), PanCanadian’s president described the deal the Canadians.received from the Montana dummies running Montana Power.

“It wasn’t rocket science to see the potential of this deal for PanCanadian. We’ve already increased our gas production by 15 percent on the former Montana Power lands since the closing of the deal.”

Shortly thereafter, on April 18, 2002, PanCanadian closed what remained of its Butte office. As of that date not a trace remained of what was once Montana Power’s vast natural gas empire in the western United States and Canada.

Then, after Goldman-Sachs had pocketed its hefty fees and said goodbye, and with Touch America headed down the bankruptcy tube, PanCanadian merged with another Calgary company, Alberta Energy, to form the present Calgary based EnCana Corporation.

Today, EnCana has become one of the world’s largest independently owned natural gas companies in the world with over 5,000 employees..

Better yet–in both 2003 and 2004–EnCana was Canada’s most profitable company reporting $3.5 billion (U.S.) in profits on $12.2 billion in revenue.

And better days are coming. In October, Dow Jones Canada reported EnCana was said to have rejected a bid from Shell Oil for close to $60 billion.

And at home, EnCana has just announced that in Calgary they would build what will be Canada’s largest office tower (outside of Toronto.) The cost of this Canadian jewel is estimated at $500 million or over.

Besides the new megabucks Calgary structure, EnCana also said it will spend $200 million constructing a new state-of-the-art natural gas processing plant in Colorado.

And that is the way it goes in the Big Sky. The Wall Street bankers are happy and the Canadians are happy.

And predictably, the Montana resident, as usual, has been left to the debaucheries and depredations of the Wall Street bankers and the marketplace which will be forever included in his or her’s monthly utility bills..

Hopefully, and hopefully is the best we can do right now, a day will come when the Montana public will get fed up with what has been described above happening over and over again.

And if I don’t sound too optimistic about that change, there is good reason. Montana history, time and time again,
is a rerun of the past.

JACKIE CORR lives in Butte. He can be reached at


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