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Report: Wyoming coal production likely faces more declines
Wyoming coal

Report: Wyoming coal production likely faces more declines

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A truck moves dirt and debris at the Antelope Mine outside of Wright. According to a report released by the Energy Information Administration, Wyoming coal production likely faces more declines.

Coal’s outlook was dimmed Tuesday in a new report released by the Energy Information Administration, an independent, federal agency.

Production in Wyoming’s Powder River Basin could fall to about 260 million tons by 2023, according to the Annual Energy Outlook. Of the three coal regions in the country, the West and Appalachia are both poised to lose. Midwestern coal production may increase slightly.

Coal production is projected to remain relatively stable to slightly declining in the Powder River Basin in the decades following its low point in five years.

In 2017, the Energy Information Administration charted a sliver of hope for coal production, if the emissions-reducing Clean Power Plan was not implemented and natural gas prices were high.

In that case, Wyoming coal production in particular could have reached historic norms of 400 million tons per year, before trending to a slow, but perhaps manageable, decline, the administration projected last year.

The annual forecast from the Energy Information Administration models a variety of outcomes for energy production, consumption and exports based on variables like oil and gas prices, technological development, and occasionally, policy changes.

Confidence in coal has improved in Wyoming in the last year as production climbed out of a historic slump and companies tightened operations to adjust to the “new normal” of reduced coal demand.

Wyoming produces about 40 percent of the country’s coal. The state’s two largest mines alone, North Antelope Rochelle and Black Thunder, account for nearly one-quarter of national production.

But declining demand for coal to burn in power plants has rapidly eroded coal’s dominance in the electricity market. In the last three years, coal went from producing about 40 percent of the country’s electricity, to 30 percent. Wyoming in particular has lost nearly 1,000 miners since 2015, though a fraction has returned.

The independent federal agency shifted its baseline expectations somewhat this year. Though conditions in the coal sector would certainly worsen under the Obama-era Clean Power Plan – a regulation currently being unraveled by the Trump Administration — other factors in play will continue to drive down coal demand nonetheless, according to the outlook.

Low natural gas prices are the key factor in the challenge to coal, said Linda Capuano, administrator of the Energy Information Administration, in a live release of this year’s outlook data.

As gas outcompetes coal in the electricity sector, the most expensive coal plants to run will continue to be shut down, she said.

Wyoming has already lost customers to this trend. Two coal-fired power plants slated to close in Texas bought the majority of their coal from Peabody Energy’s Rawhide mine north of Gillette.

Natural gas is the biggest variable in coal’s outlook, but it’s not the only one. Renewables are expected to grow in every scenario, whether gas prices are high or low, whether the country has economic growth or not.

“More intense natural gas competition. Greater renewable build out. It’s the two sides of the vice on coal,” said Rob Godby, director of the Center for Energy Economics and Public Policy, who has studied the Wyoming coal economy on behalf of the Wyoming Legislature.

Last year the EIA’s outlook contained more positive news for the coal sector. Production could have seen a rebound before slow declines in some scenarios. That’s diminished, Godby said.

“Where we are now, in 2018, they’re saying is as good as we get,” he said.

The outlook is not a sure bet, and highlights the complexity of forecasting markets like oil, gas and coal, Godby said.

“Energy systems are some of the most complex in the world,” he said. “What [the outlook] is useful for is in comparing the different side cases. You can see how changing one basic assumption changes the outcome.”

Travis Deti, executive director of the Wyoming Mining Association, said the Energy Information Administration report did not contain any surprises.

The general takeaway is stability, he said, noting coal’s projected use well into the next three decades.

“One way or the other, I think it shows that our coal resource is important,” he said. “And it’s going to be important going into the future.”

The projection that coal production in the West would decline is likely a look at non-Wyoming mines, he said.

The Powder River Basin coal of Wyoming and southern Montana continues to be a cheap resource that is likely well-placed even as the market narrows, Deti said.

“You take these reports for what they are,” he said. “A snapshot of where we are, what the markets look like and some predictions on the markets.”

Follow energy reporter Heather Richards on Twitter @hroxaner


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Energy Reporter

Heather Richards writes about energy and the environment. A native of the Blue Ridge Mountains in Virginia, she moved to Wyoming in 2015 to cover natural resources and government in Buffalo. Heather joined the Star Tribune later that year.

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