Staff recommends that the City Council approve a 40-year lease with NorthWestern Energy (NWE) to expand and rebuild the Rimrock Substation on the Airport property located next to their existing substation.

NWE desires to expand and rebuild their electrical substation between Airport Road and Black Otter Trail.  The current Rimrock Substation abuts the easterly edge of the Airport's property.  This parcel of the Airport's property was purchased with FAA funding assistance to provide runway approach protection and noise mitigation.  NWE has approached the Airport about utilizing some of this Airport property to construct a new substation, which would replace and expand the capabilities of the adjoining 60-year-old Rimrock Substation currently in place.  This project would ultimately stabilize and expand the electrical power available to meet the needs for the Billings area well into the future. 

The Rimrock Substation is one of three critical substations that provide electrical power to the Billings area and the location of this substation is very important for providing electrical service to Billings due to how it is strategically located next to the area's large transmission lines.  The reason NWE desires to rebuild the existing 60-year-old substation includes the need to replace the existing, mostly wood construction to meet modern steel standards, increasing the strength of the substation structures and subsequent reliability going forward.  Additionally, this project will expand the electrical transmission capabilities for this substation, making it able to accept more power from the existing multiple transmission line feeds. The new substation will cost roughly $30 million to construct, will increase the Rimrock Substation's electrical capacity needed for the continued growth of the Billings area, and to balance and provide the electrical loads for areas far beyond the Billings area.  Furthermore, this new, increased electrical capacity will provide NWE with options to re-route power through this substation for other maintenance or emergency repairs and to also handle the high peak loads that occur during the Summer cooling and Winter heating seasons.  NWE would like to start this project this Spring.

The Airport and the FAA have reviewed the use of this site for this requested purpose and determined that this would be an appropriate use of this parcel.  For NWE, this site has significant advantages to it versus the other parcel of City property directly east of the existing substation.  Building on the lot to the east would require significantly more dirt work to level the site, and due to the location of the existing hot transmission lines and towers overhead, it would be difficult to work around and under, providing a much more hazardous construction environment and ultimately costing significantly more to develop.  The east parcel is owned and utilized by the City's Public Works Department for the storage of snow removed from streets and as a materials ware yard for Public Works projects.  Its location is critical to its on-going operations to support the Billings Heights area.

The 14.44 acre lease with NWE would be for 40 years with an initial lease rate of $29,245.94 per year, adjusted annually by the Consumer Price Index for all Urban consumers (CPI-U). 

City Council may:

• Approve the lease of Airport property with NWE so they can expand and rebuild the Rimrock Substation; or
• Disapprove the lease with NWE and direct staff on how to proceed.

The Airport will generate annual lease rentals beginning at $29,245.94, which will be increased annually via the CPI-U.