BIG PIVOTS: Outrage in Coal Country

This story originally appeared on BigPivots.com on May 30, 2024.

Hisses and cheers, outrage and elation. These were predictable responses when the Biden administration announced that it plans no new leasing for coal in the Powder River Basin.

Wyoming’s congressional delegation had their usual talking points. Sen. John Barrasso called it part of President Joe Biden’s war on Wyoming.

“This will kill jobs and could cost Wyoming hundreds of millions of dollars used to pay for public schools, roads, and other essential services in our communities,” Barrasso said in a statement. “Cutting off access to our strongest resource surrenders America’s greatest economic advantages — to continue producing affordable, abundant, and reliable American energy.”

Other politicos from Wyoming echoed his words. This will cause the United States to become dependent on energy from other countries. It will create more pollution in other countries who don’t have access to Wyoming’s clean coal. And so forth.

My e-mail revealed some hurrahs from those in the environmental camp. “Wow,” said one individual. Organizations were supportive but more restrained. “A monumental decision,” said an individual from Earthjustice.

My take? It was a decision without consequence. Several people in Wyoming confirmed my reaction.

“This is a symbolically significant decision for the climate but in terms of practicality it means absolutely nothing,” Shannon Anderson, the staff attorney for the Powder River Basin Resource Council in Sheridan, Wyoming, told me.

At current rates of extraction, coal companies that mine in the Powder River Basin have enough deposits to continue mining until 2041, she pointed out, citing research by the Bureau of Land Management. The BLM, the federal agency, is responsible for leasing coal from the subterranean land. It does so only in response to proposals from mining companies. In other words, the companies must ask to mine more coal. They haven’t done so lately.

None have done so since 2012. Two pending leases have stalled since 2015, awaiting action by the companies. The door was open for a long time without any coal companies walking in.

“It doesn’t make sense to make federal land available for coal leasing if the coal industry doesn’t want that land,” said Anderson.

In its announcement of the end of new coal leases in the Powder River Basin of Wyoming, the BLM noted that coal continues to be extracted from 12 surface mines in the field. They produced 220 million short-tons of coal in 2022, compared to 400 million tons in 2008, the peak year for coal extraction in both the Powder River Basin and the United States altogether.
Coal trains, downtown Denver, March 15, 2018

Coal trains two-abreast wound their way through Denver’s LoDo district in March 2018. Demand from Colorado power plants for Powder River Basin coal has already slackened and will cease altogether before 2031. Top:Trains load with Powder River Basin coal at the Black Thunder Mine in May 2011. Photos/Allen Best

Paramount is the decline in demand for coal. We’re burning less coal but that’s not because it is less available. Rather, it’s because we have cheaper alternatives and ones that produce fewer or no greenhouse gas emissions.

Colorado burns Powder River Basin coal, but not as much as it once did. Two coal-burning units went down in 2022, one in Pueblo and the second in Colorado Springs.

Two more at Pueblo will follow plus one near Colorado Springs (Nixon), and one north of Fort Collins (Rawhide). Near Brush, the Pawnee coal plant will be converted to natural gas no later than 2026.

All burn Powder River coal, and all will be closed by the end of 2030, perhaps earlier.

On X, the social media platform, I noticed the reaction of Larry Wolfe, who lives in Cheyenne and was for 30 years an attorney specializing in energy with legal heavyweight Holland and Hart.

“You are not watching the news, John (Barrasso), the coal industry is going out of business,” he had written the day after the announcement. “They don’t need new leases. They don’t have the demand for the coal they already own. Down 20% this year, with the companies forecasting 10% annual declines. Done in WY in 10 years or less.”

I called Wolfe to get a keener understanding of Wyoming coal and energy more broadly.

“If you are going to be realistic about this, you have to look at some of these coal companies,” he told me. “They’re not great companies anymore. They used to be — Peabody and Arch and a couple of others. They are not great companies anymore.”

Arch and Peabody were among the 60 coal companies who declared bankruptcy between 2012 and 2020. In addition to mines in the Powder River Basin, they also have mines in Colorado.

Colorado for a couple years had the coal equivalent of man bites dog. A company had reopened a mine west of Trinidad. Then it, too, closed. My research suggests limited coal mining in northwest Colorado beyond 2028, when the last power plant there closes.

West Elk, near Paonia, the state’s largest producer, which is owned by Arch Resources, may last longer. It has reserves of 10 to 12 years at current rates of extraction. It produces about one-tenth the volume of the company’s Black Thunder Mine in the Powder River Basin.

On the campaign trail in 2016, Donald Trump promised to bring back “clean, beautiful coal.” He didn’t.

In November 2020, after the election, S&P Global Market Intelligence recalled Trump’s campaign vow. Instead, said S&P, a market analyst, coal jobs had declined 24% during his presidency. In leaving the White House he will likely leave the nation with the “lowest coal production and job figures in recent history.”

Coal undeniably benefited Wyoming. Wyoming accumulated $2 billion in just coal lease bonuses. The money was used to upgrade almost every school in the state, says Wolfe. That went away after about 2015-2016.

The hard-right component of the Republican Party of Wyoming professes to believe that the world around Wyoming has not changed except for the lunk-headed Democrats in Washington D.C. and maybe wayward states like Colorado.

Gov. Mark Gordon, also a Republican, has a more moderate view. He wants to see carbon capture and sequestration technology emerge as the answer that will allow Powder River coal to have a future. There are several coal plants near Gillette and, of course, Powder River coal for decades was delivered to power plants as far away as Georgia.

In his year as chair of the Western Governors Association, Gordon has made CCS (also called carbon capture storage and utilization, or CCSU) his key initiative, the way that Colorado Gov. Jared Polis the prior year had made geothermal his key initiative.

Wyoming also adopted a law that required its coal plants to test carbon capture.

In Colorado, the Polis administration sees a more limited role for carbon capture, such as for sequestering emissions from ethanol plants. Tri-State Generation and Transmission also proposes a new natural gas plant in concert with carbon capture technology.

The Colorado Land Board seems to think this can constitute a revenue stream in years ahead. It has already leased lands near Yuma, Pueblo, and in Weld County.

With his eye on Wyoming, Wolfe is skeptical the technology will pan out.

“Carbon capture doesn’t work very well. It’s not any kind of salvation. The trouble the carbon capture people have is they want to put this technology on old (coal) generation stations that have outlived their useful lives.”

Doing so will require spending perhaps a half-billion dollars per plant. And that will mean having to operate the coal plants for another 30 to 50 years to monetize the additional cost.

Wolfe calls it one of those “little naughty problems that lawyers bring up that people don’t want to talk about, but which are very real.”

Electric utilities “have been passing along research costs to consumers, and those costs have been tolerable. But they have to start making major investments about how to figure out everything,” says Wolfe. “The consumers will just go ballistic, because they won’t want to absorb the cost of what is likely to be a unproductive technology.”

Can carbon capture and sequestration technology be demonstrated to be economically feasible at the Jim Bridge Station in southwestern Wyoming? Photo/Allen Best

Jim Bridger, Wyoming’s largest coal plant, has a capacity of almost 2,442 megawatts — alone equal to the four coal plants on Colorado’s Eastern Slope. It has been identified as among the coal plants that may get retrofitted with carbon capture equipment.

WyoFile’s Dustin Bleizeffer, in an April 2, 2024, story, reported that two electric utilities were planning advanced engineering studies and analysis of potentially retrofitting Bridger’s four coal-burning units. Wyoming ratepayers, he reported, were already paying more than $3 million annually for the initial phases of study but will soon be paying $10 million to $20 million — “with no guarantee that a single coal plant might ultimately be retrofitted with the technology.”

In 2023, he reported, Rocky Mountain Power had estimated a cost of $1 billion per coal unit to install the technology. Another utility, Black Hills Energy, had reported the cost of retrofitting a power plant near Gillette called Wygen II at between $500 million and $668 million. The company in 2008 had estimated the cost at $182.5 million, or the equivalent of $268 in current dollars).

Where might the demand for coal-fired power come from?

Cheyenne has been loading up on data centers. They can be seen while driving west from Cheyenne on Interstate 80. Microsoft has two and Meta just weeks ago was revealed to be the company behind a 945-acre data center development in Cheyenne. An 800,000-square-foot facility is planned.

Low electricity costs and Cheyenne’s coolish temperatures – spring comes about a month after it does in Denver just 100 miles to the south – help explain the draw. Resource adequacy could conceivably revive the coal market somewhat, although a safer bet would be on natural gas.

The same questions are starting to be asked in Colorado. The state’s energy office estimates that demand for electricity will increase 50% by 2040.

Wolfe predicts a cascading decline for Powder River coal. Multiple mines will close, leaving just a few that will be highly efficient, using autonomous mining machinery. Railroads – essential to delivery of Powder River coal – will lose interest in serving the much-diminished industry. “They will be wanting to repurpose the engines,” says Wolfe.

“This notion of a sort of glide path down, I wouldn’t count on that for a moment. If you have a couple of back-to-back winters that are really warm and the utilities are maintaining large stockpiles, the companies are going to get into desperate straits.”