Trump's Pledge to Save US Coal is Failing, Leaving Coal Country in Crisis
By Scott Cohn
October 9, 2019 - Pledges by President Donald Trump to save the U.S. coal industry and boost so-called clean coal technology are proving to be no match for the free market. Competition from lower-cost natural gas and renewables has led to a wave of bankruptcies and layoffs as coal production declines.
US President Donald Trump holds up a “Trump Digs Coal” sign as he arrives to speak during a Make America Great Again Rally at Big Sandy Superstore Arena in Huntington, West Virginia, August 3, 2017.
Photo by Saul Loeb, AFP | Getty Images
Government forecasts from the U.S. Energy Information Administration call for a 10% drop in coal production nationwide year-over-year in 2019, with further declines expected next year. In the past five years, output is down 27%.
The cuts come as power companies drastically reduce their coal use, retiring coal-fired plants or converting them to natural gas. Last year alone, utilities retired 13 gigawatts of coal-fired capacity — the equivalent of about 25 power plants — according to the EIA. That is the second-highest annual figure on record. The agency projects another 17 gigawatts to go offline by 2025. Coal stockpiles at U.S. power plants are at their lowest level in a decade.
Trump administration efforts to prop up the industry, which include replacing the Obama-era Clean Power Plan with the new Affordable Clean Energy Rule, giving states more flexibility to keep coal-fired power plants open, have thus far made little difference. That is because the economics increasingly favor natural gas and renewables.
A 2018 analysis by Lazard, a financial advisory and asset management firm, put the cost of coal power at between $60 and $143 per megawatt-hour. But newer technologies, like fracking, make natural gas considerably cheaper, at $41 to $74 per megawatt-hour. Wind energy is even cheaper, at $29 to $56.
No state is harder hit by the coal slump than Wyoming. It is the nation’s largest coal producer, accounting for more than 40% of the nation’s output. And the lower-sulfur coal mined in Wyoming’s Powder River Basin is key in the efforts to make coal more environmentally friendly. But demand has collapsed. Two of the state’s largest mining companies — Cloud Peak Energy and Blackjewel — filed for Chapter 11 bankruptcy protection within two months of each other this year. Blackjewel’s filing abruptly threw nearly 600 miners out of work in July.
The Eagle Butte coal mine in Gillette, Wyoming, is one of two mines that closed abruptly in July, throwing 600 miners out of work, when owner Blackjewel LLC declared Chapter 11 bankruptcy.
Photo by Matt McClain, The Washington Post/Getty Images
All in all, according to the U.S. Bureau of Labor Statistics, coal mining employment in Wyoming is down 13% in the past year.
Even in the heart of coal country, where low transportation costs make coal much less expensive than in other parts of the country, utilities are reducing their coal use and turning to alternatives like wind and solar.
“Renewables are coming into the market, and our customers are making the choices,” said Mike Easley, CEO of Powder River Energy, a member-owned cooperative serving some 27-thousand customers.
Coal production statewide through the first half of this year is down 30% from the same period five years ago, according to the Wyoming State Geological Survey. A key state revenue source, bonuses paid to the state by mining companies based on their federal coal leases, has all but dried up. The payments totaled nearly $220 million as recently as 2016. That figure plummeted to around $5 million last year.
Wyoming Gov. Mark Gordon, a Republican, said the decline is leaving a mark.
“The difficult thing for Wyoming really comes to our education funding,” he told CNBC. ”[The lease bonuses] allowed us to build schools that will help a workforce stand up to be more nimble, and technically able to take on other jobs.”
The state has been steadily slashing education spending, including an estimated $100 million in budget cuts since 2016. But the state still faces an education shortfall that could reach $1.8 billion by 2022, according to legislative analysts.
Earlier this year, the governor directed all state agency heads to “look for efficiencies” as he prepares a new two-year budget for the fiscal period beginning in July. Those cuts would come on top of widespread cuts in the current budget, which officials say was the smallest state budget in more than 15 years.
In the heart of the Powder River Basin in Gillette, Wyoming — which bills itself the Energy Capital of the Nation — Mayor Louise Carter-King says they are bracing for the impact.
“We only operate with cash on hand,” she said. “We don’t use forecasted money, because we just don’t know.”
So far, the nationwide worker shortage, along with strength in oil prices — boosting another Wyoming resource — have helped blunt the impact of the coal downturn. Unemployment in Campbell County, where Gillette is located, jumped to 5.7% immediately following the Blackjewel layoffs in July. But it quickly fell to 4.5% the following month, according to the Wyoming Department of Workforce Services. Unemployment statewide was 3.7% in August, in line with the national average. But officials are not resting easy.
“It’s not like we ever relax and say, ‘Okay, good. We’re back to normal,’” Carter-King said, “because we just don’t know what could happen.”
Compounding the problems for Wyoming and its mining companies is a long-running dispute with West Coast states that have refused to open their ports to coal exports.
In particular, Washington state, citing environmental concerns, has blocked plans by privately-held Lighthouse Resources to export coal from its mines in Wyoming and Montana through a terminal it wants to develop in Longview. The company sued Washington and its governor, Jay Inslee, in federal court last year, claiming Washington’s action was an unconstitutional restriction on commerce in coordination with Oregon and California.
In March, Wyoming filed a friend-of-the-court brief on behalf of eight landlocked states in support of the company. Gov. Gordon has thus far resisted calls for the state to sue Washington directly but said the state is “actively looking at what a lawsuit would look like.”
“If we’re held hostage by West Coast states and are unable to get our products to market when they’re clearly demanded in Asian countries, this is particularly problematic for Wyoming,” Gordon said.
Steve Gili looks at an exposed wall at the Black Butte coal mine outside Rock Springs, Wyoming.
Photo by Jim Urquhart, Reuters
The state is also backing research aimed at making coal more environmentally friendly, including so-called carbon capture technology to reduce or even eliminate harmful emissions.
This week they are welcoming the first of several tenants who plan to set up shop at Wyoming’s Integrated Test Center, a public-private partnership aimed at finding uses for the carbon dioxide produced by burning coal. The center uses flue gases siphoned from the Basin Energy Cooperative’s Dry Fork Power Station. A series of pipes carry exhaust from the power plant to a series of outlets to be used by researchers at the test center next door.
“We’ve really been focusing on better ways that we can use the coal resource, not only before it’s burned but also with things like the Integrated Test Center, which will take carbon dioxide and try to find better uses for it,” Gordon said.
But ultimately, even Gordon acknowledges that the state will need to reduce its economic reliance on coal, which accounts for about 14% of the state’s $38 billion gross domestic product.
“When I talk about Wyoming’s economy, I do talk about a diversified economy,” Gordon said. “And so when we look at the future, we want to make sure that we have a diverse set of income flows as well.”