HELENA -- Like its citizens and businesses, the state of Montana is feeling the pinch of rising natural gas and gasoline prices, fiscal analysts told the Legislative Finance Committee on Friday.

The impact of rising natural gas rates won't be felt as badly throughout state government as it might have been otherwise, Taryn Purdy, a principal fiscal analyst, said.

The state signed a two-year contract with Jefferson Energy of Butte locking in the gas commodity price at $6.66 per dekatherm for two years to supply certain state government buildings with storage and $6.86 per dekatherm for those buildings without storage. These prices do not include gas transmission costs.

Although some criticized these rates as too high at the time, "we actually have a very good contract right now," Purdy said.

The commodity cost of natural gas is more than $12 per dekatherm at the Henry Hub, a major distribution point, and Purdy said she's seen prices approaching $14 a dekatherm.

A number of state agencies buildings within Helena within the Capitol Complex, along with some state institutions and university system buildings secure their natural gas through this contract, she said.

Among those that don't, however, are the departments of Military Affairs, Corrections, Commerce, Natural Resources and Conservation, Office of Public Instruction, State Fund and Montana Law Enforcement Academy.

State government, which has several thousand buildings, paid $9.1 million in natural gas bills in fiscal 2004.

The Montana university system paid $9.7 million or 58 percent of the state's $13.4 million total gas bill in fiscal 2005.

Purdy said not all state agencies pay their natural gas bills directly. Some pay for what they consume or a set charge to the Department of Administration as part of their rent.

The risk to the state over higher than anticipated rates, usage or both is that the current rental income will fall short, Purdy said. If so, agencies either must cut consumption or seek additional funds from the Legislature.

As for gasoline prices, Greg DeWitt, a senior fiscal analyst, said agencies are faced with motor fuel costs that are 46 percent higher than anticipated when the Legislature set the budgets and projected to settle at 22 percent higher than anticipated for the next 21 months. He cited U.S. Department of Energy projections that gasoline prices would settle at $2.50 a gallon by early 2006.

He said Gov. Brian Schweitzer has asked agencies to live within their budgeted fuel amounts through conservation, car pooling and using videoconferencing and teleconferencing.

The Montana Highway Patrol faces a $250,000 fuel budget shortfall for the year, according to Larry Fasbender, deputy director of the Justice Department.

Unless the department parks the officers' cars--which Fasbender said the department has no plans to do--it has no way to address the problem by seeking a supplemental budget adjustment.

30

20051008T023801Z