A new study from the Institute of Energy Economics and Financial Analysis, a think tank advocating a transition away from fossil fuels, charts the decline of the Powder River Basin coal industry and warns of more difficulties to come.
The basin’s mines are the most vulnerable parties in the rapid transition to greener energy, states the report, which was released Monday.
“In the broad and fast-moving transition occurring across U.S. electricity-generation markets, no region stands at greater economic risk than the coal-rich Powder River Basin of Montana and Wyoming,” the report states.
The usual suspects in coal’s decline are pointed out in the report, from the rise of natural gas-fired power to renewables. It paints a now-familiar scenario: As customers for Powder River Basin coal wink out, so do tons of coal produced in Wyoming or Montana.
What’s happening to the coal sector now reverses a more than 30-year trend in Wyoming.
Coal production in Appalachia began to crumble from its 1990 apex just as Wyoming’s Powder River Basin coal sector was taking off, thanks in part to federal environmental regulations and de-regulation of the railroads, which made Western coal suddenly the best and cleanest fuel. The PRB’s production would rise dramatically for nearly 20 years, hitting a high in 2008.
Western coal production is down 35 percent from its high in 2008. That decline is expected to continue, according to the report.
Powder River Basin mines that have one buyer of their coal — such as the Rosebud and Absaloka mines in Montana — are noted as the most at-risk operations in the basin.
Those are followed in terms of vulnerability by lower heat mines like Cloud Peak’s Cordero Rojo, Arch Coal’s Coal Creek and Blackjewel’s Eagle Butte mines among others.
Cheap natural gas, rising renewables and federal regulations are commonly cited as reasons for coal’s current troubles. Less attention is paid to the technological disruptions that the report identifies as continuing the downward trend for PRB coal. They include a report that grid management is changing rapidly and so more renewables like wind and solar are being incorporated than was thought possible in the past. Battery storage advancement is also noted as a significant contributing factor in the changing picture for U.S. coal.
“These forces, taken together, have created a technology-driven shift in power- generation markets that is likely to continue to gain momentum,” the report states.
Travis Deti, executive director of the Wyoming Mining Association, said studies like these are sometimes overly dramatic, but that the basic assumption that coal faces challenges is true.
“I do think it’s fair to say there is a long-term concern in the coal industry,” he said. “No one is surprised at that. Everyone is very realistic about it.”
With some state and federal support, existing coal plants could keep burning, however, and at least not be closed prematurely, he said.
The report also argues against exports to Asia and carbon capture. Wyoming officials tout both as ways to address coal’s declines.
The report calls carbon capture a “pipe dream.”
Both carbon capture and exports have long been on Wyoming’s list of defenses to the coal crisis.
Then-Gov. Matt Mead asked the Wyoming Legislature for $15 million in 2014 to build the Wyoming Integrated Test Center outside Gillette for carbon capture research. Gov. Mark Gordon has continued in that vein, recently receiving legislative support for a $5 million carbon capture pilot project that would capture 75 percent of emissions before burning fossil fuels.
Similarly, exports are out of reach for reasons outside of Wyoming or Montana’s control, from opposition to ports on the West Coast to the economic cost of transportation, the report argues.
The study notes that Cloud Peak Energy’s Spring Creek mine in Montana — which has benefited from the company mission to secure contracts in Asia — increased production by 1 million tons in 2018. In contrast, the firm’s Wyoming mines lost 9 million tons of production during that time.
The firm’s Wyoming operations, Antelope and Cordero Rojo, sell coal to power plants within the United States.
Cloud Peak has been struggling financially, with reduced production and operations troubles and upcoming debts. The firm is expected to continue its path towards bankruptcy or sale.
Cloud Peak’s currently instability is a notable wild card in the story of the Powder River Basin today.
Deti said he couldn’t speculate about what would happen next with Cloud Peak.
“It’s tough,” Deti said. “I think it’s part of that normalization over the last five years, with different companies making different choices to continue to make those mines operational up there … in a situation where their customer base is shrinking.”
The report’s prediction for the Powder River Basin in light of coal’s challenges is dire, one of economic hardship, declining revenue and disappearing jobs.
One in 10 households in the region is directly supported by the coal production industry, the report estimates.
“The Powder River Basin’s coal industry is in structural decline,” the report states. “This will put continued pressure on the PRB’s mines and lead to rising economic uncertainty in the region.”