NEWCASTLE – To hear miners at Perkins Tavern on Main Street tell it, coal is the present and future of this small, northeast Wyoming town.
“This is who we are around here. I’m proud of what I do,” said Al Sanchez, 38, wearing a Black Thunder Coal Mine sweatshirt. “The mine is too big to wake up tomorrow and have the lights shut off.”
Arch Coal owns Black Thunder, one of the largest open pit mines in the U.S. about 50 miles southwest of Newcastle.
Sanchez worked on oil rigs before the mines. He came to Newcastle for a job with consistent paychecks, benefits and a regular schedule. The mine allows him to pay his bills and support his family.
No, it’s not going anywhere, he said.
This is a common refrain heard around the bar: Wyoming's coal mines are too important to America's energy landscape to ever close.
J Workman, 32, moved to Newcastle from Laramie nine years ago for similar reasons – a steady job he could rely on every day. Coal powers the country, he said. Powder River Basin coal specifically. The nation needs it.
But he worries about bad press. People think coal is harmful to the environment, which could lower demand and ultimately hurt the mines.
“To say our coal is dirty is borderline slander,” he said. “This is a coal community. If something happened to Black Thunder alone, the town would shut down. We have to be able to tell our families we’re all right.”
Depending on whom you talk to, Workman has reason to be worried. All of the major coal companies have been posting losses for months. For many of them, good news comes in the form of smaller losses. Reasons for the downturn are numbered and debated. But what everyone seems to agree on is this: The last train in the U.S. to leave for a coal-fired power plant will come from the Powder River Basin.
This isn’t the first time analysts have written coal’s obituary, said Robert Godby, director for the Center of Energy Economics and Public Policy at the University of Wyoming.
“We thought nuclear would take over, and gas would take over, and coal is still around and still the biggest part of our energy,” Godby said. “It’s cheap and dependable, and there is infrastructure to get it there. And it is cleaner that it has ever been.”
Coal is responsible for about 40 percent of the nation’s energy. Of that, Wyoming’s Powder River Basin supplies the country with about 40 percent of its total coal. In 2014, Wyoming produced 396 million tons.
Coal has been the foundation of the Wyoming economy for decades. It helped the state through the dark days of 1990s, after the oil bust and before the natural gas boom. The wider coal economy in Wyoming, which includes shipping, power generation and jobs, is about 14 percent, and coal lease bonuses pay for most of Wyoming’s school construction, Godby said.
But the future of coal in Wyoming is looking uncertain on a number of fronts, he said.
The reasons vary. The first, and most immediate, is rail congestion. Trains in the Midwest are blocked by oil coming from the Bakken and a bumper crop of wheat. Gas-fired power plants are working overtime in places like Minnesota at a higher cost than coal simply because coal stockpiles are dwindling, Godby said.
“Even if (coal companies) wanted to sell more coal, they couldn’t get it to the power plants,” he said. “That’s been frustrating for a year.”
Coal usage faces hurdles from more efficient customers – people are simply using less electricity – and from renewable resources such as wind and solar, Godby said. It is also competing with cheaper, abundant natural gas. Lastly, and most concerning to miners and analysts, are proposed carbon regulations.
“Coal is the most significant CO2 fuel,” Godby said. “If you need to reduce CO2, you have to do something about coal.”
Wyoming coal’s future in 2015 is rosier than its long-term future, but still up for debate.
Powder River Basin coal production should grow by about 17 million tons over last year, said Ted O’Brien, president of Doyle Trading Consultants, an energy research firm that specializes in coal.
Rail service, a problem throughout 2014, is beginning to improve, he said. Power plant operators will be eager to replenish their stocks, and Powder River Basin coal will be the popular choice.
Wyoming’s Consensus Revenue Estimating Group, a division of state government that estimates commodity prices, predicts a bleaker outlook. In the short term, the group says coal production will remain flat as prices increase at less than the rate of inflation. And that 17-million ton increase will mostly make up for losses from last year because of rail congestion.
Coal’s future beyond 2015 is much more difficult to predict.
“The fate of the Powder River Basin is determined by natural gas and government regulations,” O’Brien said. “Now, Powder River Basin coal is the most competitive U.S. basin against natural gas. However, certain government regulations pose a pretty big threat to coal generation across the board over the next 15 years.”
The U.S. Environmental Protection Agency filed plans in June to cut carbon emissions from existing coal-fired power plants. If those regulations go through, and without a new type of technology or ability to capture carbon, Wyoming’s coal industry will be affected, Godby said.
Which is why many companies are putting their hopes in coal ports to ship Powder River basin coal overseas.
The international market currently only accounts for about 1 percent of Wyoming’s coal usage, O’Brien said. Ports could change those percentages.
But the problem could be one of timing, Godby argued.
The earliest ports are scheduled to be built and finished in the Pacific Northwest is 2018. China, the world’s largest consumer, says it plans to peak its coal use by 2019.
“You kind of missed the boat, literally,” Godby said. “It’s a pretty weak outlook. At best, it’s flat; at worst, it’s declining.”
Back in Newcastle, where many of the 3,400 residents work at Powder River Basin coal mines or in related jobs, Jose Rosales tempers his buddy’s worries as he sips his Coors beer.
“If people think they’ll run this country on oil and wind, they’re wrong. They need coal,” Rosales said. “You can’t run California’s grid on river water.”
Rosales, 49, spent 25 years working in underground coal mines before a pacemaker moved him to the surface. Mines in other parts of the country could be hurt, he said, but not the Powder River Basin.
He’s right to some extent, analysts say. Wyoming is better positioned than other U.S. coal producers.
Prices on Powder River Basin coal were up 3.17 percent from 2013 to 2014. At the same time, Central Appalachia coal prices were down 24 percent, Northern Appalachia declined 8 percent and Illinois Basin coal fell 15.3 percent, O’Brien said.
“At the end of the day, our country has an energy grid built on coal, and a very large chunk of that is Powder River Basin coal, and that is certainly not going to change overnight,” O’Brien said. “Though there is some risk in the longer term due to government regulations.”
The irony, according to Godby, is that government regulations restricting sulfur emissions made Powder River Basin coal desirable. Wyoming coal has lower sulfur content than its counterparts in other parts of the country.
Prior to that time, Powder River Basin coal wasn’t particularly attractive to utilities. It was further from market, boasted fewer BTUs per pound and higher moisture content than its domestic peers. Air quality regulations made Wyoming coal more attractive because power plants didn’t need expensive scrubbers to remove sulfur from its emissions.
Now Cowboy State coal is cheaper to use and Wyoming is by far the country’s largest source of coal.
“What the fed give, the fed taketh away,” Godby said.