The country’s energy data center tempered forecasts for Western coal production as demand for the mineral declines nationwide and market uncertainty persists, according to a new report released Tuesday by the Energy Information Administration.
Just one month ago, the agency expected the Western coal supply to total 369 million tons this year and drop to 356 million in tons in 2020. But the most recent report cut supplies projections for next year by 5 percent, or nearly 18 million tons, a sign that coal market instability could be sticking around for the foreseeable future. This year’s coal supply projections were trimmed compared to last month’s too.
The more conservative predictions cast an ominous cloud of uncertainty over Wyoming’s Powder River Basin, one of the top sources for coal nationwide.
The agency’s forecasts are rarely spot-on, and markets don’t necessarily remain faithful to predictions. But the relentless contraction in demand suggests structural changes have hit the mammoth industry.
“EIA has been bullish on coal for a long time,” said Clark Wiliams-Derry, director of energy finance at the Sightline Institute, an environmental think tank.
“But what is clear and undeniable when looking at trends in overall coal consumption is that … the Wyoming coal market is really hurting,” he added.
Coal production in Wyoming is down 9 percent from this time last year, according to data publicized by the Energy Information Administration last week.
“When you get down 9 percent ... that’s a big decline in a single year,” Williams-Derry said.
The administration’s forecasts come as two of the nation’s highest-producing coal mines sit at a standstill in the Powder River Basin.
Coal operator Blackjewel shuttered the pair of Western coal mines after filing for bankruptcy and losing a key creditor on July 1, bringing the the fourth- and sixth-highest producing coal mines to a halt.
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Though a skeleton crew continues to perform security and maintenance at the mines, Eagle Butte and Belle Ayr have not returned to full operation, according to a company financial report this month.
A perfect storm of competition from natural gas and renewables coupled with static electricity consumption have hit the coal industry by force, Williams-Derry explained.
Despite the grim projections layered on top of a volatile summer in coal country, the Powder River Basin could still adjust to the new market conditions, said Rob Godby, a University of Wyoming economist.
Not all is lost for Wyoming’s coal industry, but the state needs to prepare, he continued.
“Here is the problem: Output is in a structural decline, prices are falling and you have overcapacity in the basin. The truth of the matter is that’s the condition,” Godby said Wednesday. “When people just ignore (this issue), that’s the worst possible outcome. You won’t be ready for it if you don’t admit that this risk exists.”
Eventually, the basin will need to reduce the number of mines operating, he said. Wyoming’s 16 mines produced 304.2 million tons of coal in 2018, according to the Wyoming Mining Association.
“The state of industry has certainly changed, and it has changed pretty rapidly,” said Travis Deti, executive director of the association at a recent legislative committee meeting.
“We’re still mining an awful lot of coal out of Wyoming and making a lot of revenue,” he said. “It’s just not as much as in the past. And we have to come to terms with (that).”