The federal government won't be penalizing Montana for refusing to comply with the REAL ID Act, state officials said Friday -- and Montanans can use their driver's licenses for identification when they board commercial airplanes.

"We just stood our ground," Gov. Brian Schweitzer said. "We didn't blink, we didn't buckle, and they said OK. We gave up about nothing."

The agreement came together Friday, resolving a potential stand-off between Montana and the U.S. Department of Homeland Security over the REAL ID Act, which sets new security standards for state-issued I.D. cards.

In the end, both sides said they got what they wanted.

Montana Attorney General Mike McGrath wrote a letter to Homeland Security Secretary Michael Chertoff, saying it will neither implement the act nor ask for an "extension" to do so.

However, McGrath said the state already has created one of the most forgery-proof driver's licenses in the nation, and that would likely meet any requirements of the REAL ID Act.

The security requirements of the REAL ID Act have not yet been finalized.

"I urge your department not to take any steps that would penalize Montanans' ability to use their valid Montana driver licenses for federal identification purposes and commercial air travel," he wrote.

The federal government said if a state didn't file an extension by March 31, its citizens wouldn't be able to use their driver's license at federal airport security after May 11.

In a reply to McGrath on Friday, Stewart Baker, assistant Homeland Security secretary for policy, said he would treat McGrath's letter as a request for an extension.

Baker noted that McGrath's letter listed a number of security precautions that Montana already has taken for its driver's licenses, and said they meet the first phase of REAL ID requirements.

Montana therefore has an extension until Dec. 31, 2009, when the next phase of REAL ID takes effect, Baker said.

Schweitzer said he had been negotiating directly with Chertoff, saying Montana driver's licenses have the security provisions that REAL ID is expected to require in the future, but doesn't require now.

"It was becoming the theater of the absurd," the governor said. "It didn't make sense for them to penalize Montana. They've accepted where we're at and we will continue to use (our licenses) at airports."

The Montana Legislature last year passed a law saying the state won't comply with the REAL ID Act, denouncing its requirements as costly, unnecessary, potentially violating privacy rights and a violation of state's rights.

The federal act says state-issued identification cards, such as driver's licenses, must have a digital photograph, special security features to prevent counterfeiting and "machine-readable technology. States also must require certain other types of I.D. to get a license.

Schweitzer said the Montana license has a secure photograph with a hologram and a secure data strip on the back of it.