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Wyoming Officials Faced With Structural Decline in Coal

 

 

June 22, 2020 - Since peaking in 2008, coal production nationwide has been on a precipitous decline. Last year, U.S. production volumes reached their lowest since 1975, according to an analysis released Thursday by the Energy Information Administration. A decade ago, in the heydays of the Powder River Basin, Wyoming’s coal epicenter produced over 400 million tons of the commodity. Last year, the basin’s mines pumped out much less, just 267 million tons.

Most Wyoming lawmakers and industry leaders have come around to admitting there’s a problem. Cheaper electricity alternatives, like natural gas and renewables, have gradually bullied coal out of its preeminent position in the electricity generation market. Public concern over coal’s contributions to greenhouse gas emissions has metastasized. Utilities have started setting retirement dates for most aging coal-fired power plants nationwide.

The state probably won’t be able to shake this structural decline, according to analysis by University of Wyoming economist Rob Godby. The professor serves as the associate dean of the Haub School of Environment and Natural Resources and deputy director of the Center for Energy Regulation and Policy Analysis. He’s been tracking Wyoming coal production patterns for several years.

“We’ve been facing really what we would call a structural decline for several years now,” Godby said during a webinar on the state’s energy transition last week. “COVID-19 has certainly taken a lot of our bandwidth away but this has been ongoing, and it’ll be true after COVID goes away.”

Fifteen years ago, coal was responsible for generating about 50% of the country’s electricity. Last year, coal’s contributions were half that amount. It’s a shift Godby called a “seismic shock.”

The latest financial outlook compiled by the state’s Consensus Revenue Estimating Group in May also warned this decline will only persist and will be exacerbated by fluctuations in electricity demand caused by the COVID-19 pandemic.

State experts reduced early projections for Wyoming 2020 coal production by 25%. The group also predicted mineral severance taxes from coal will bring in approximately $151 million in 2020, nearly one-fifth less than what the state collected last year.

Slumps in mineral production translate into less tax revenue for Wyoming, a state deeply dependent on extractive industries. Revenue from energy affects nearly every resident of Wyoming, flowing into the state’s general fund, schools and basic infrastructure.

Mineral production made up nearly half of all property taxes received by the state in fiscal year 2019, according to state data. That doesn’t count the severance taxes paid by operators, which accounted for 21z of tax contributions made last year.

Coal also provided dozens of small communities across the state with economic activity and employment. The sector provided 9,500 direct and indirect jobs, according to Godby’s analysis. If you count the workers responsible for transporting coal in the rail industry, the number of jobs jumps to 13,000.

About 2,200 jobs could potentially be lost this year due to current conditions; it’s a loss that could affect approximately 5% of households in the Powder River Basin, according to the economist’s analysis.

Initial weekly coal production data collected by the Energy Information Administration through June 13 paints a grim picture for this year’s second quarter production in the Powder River Basin, too. Twenty-four weeks into the year, the basin has produced 28.6 million tons less when compared to last year at this time. The results could improve in the remaining days of the quarter, and may fluctuate once the U.S. Mine Safety and Health Administration releases its data for the quarter. Nonetheless, the outlook looks undeniably bleak for Wyoming coal country.

To Godby, the state needs to commit to a transition plan, which includes supporting smaller, coal-dependent communities hit particularly hard from the downturn, while also promoting rigorous economic development. That’s the bottom line, he said.

“Coal mining is part of Wyoming’s identity, but it’s going away, so how do we change?” Godby asked. “It won’t be easy.”