Demand for Wyoming Coal is Collapsing. Seismic Changes Are Ahead For the State.
January 9, 2023 - Wyoming used to power the nation.
For 37 years and counting, U.S. power plants have burned more coal from Wyoming than from any other state. The millions of tons loaded each year onto thousands of trains and distributed to hundreds of buyers have afforded Americans steady access to the many, multiplying conveniences of modern life.
Lower in toxic sulfur compounds than its East Coast counterpart and possible to mine at an unmatched scale, Powder River Basin coal rose between the close of the 20th century and the dawn of the 21st as a natural source of pride, and wealth, for Wyoming.
The big paychecks and good benefits dispensed by coal mines supported entire families. Power plants situated at the mouths of those mines kept utility bills low. The mines’ tax dollars built Wyoming’s schools and, along with oil and natural gas companies, pumped enough revenue into the state economy that individuals remained largely off the hook.
“We have so much money in the state coffers that came in from energy,” said U.S. Sen. John Barrasso, R-Wyo. “We’re committed to make sure those resources don’t get stranded and [are] able to be used for the benefit of all the people of the state. And coal’s a big part of that.”
Almost all of Wyoming’s coal — over 96% in 2021 — comes from Campbell County, where Peabody Energy’s North Antelope Rochelle Mine and Arch Resources’ Black Thunder Mine have competed with each other for the title of most productive coal mine in the country. Seven more Campbell County mines also rank in the top 15 nationwide.
Every one of those mines opened between 1972 and 1985, bringing with them abundant blue-collar jobs that paid roughly double the state average and catapulting Gillette, Campbell County’s lone city, from a population of 7,194 in 1970 to 17,545 in 1990, and to 33,403 by 2020, U.S. Census data shows.
“Arch Coal treated our family amazing,” said Shay Lundvall, Gillette’s newly elected mayor.
(The company changed its name from Arch Coal to Arch Resources in 2020 to reflect a shift in focus away from its Wyoming and Colorado operations and toward its metallurgical mines in West Virginia, which produce a different type of coal used chiefly for steelmaking.)
A few summers at Black Thunder in the early 2000s, when the Wyoming coal industry was nearing its peak, paid Lundvall’s way through college. His father worked at the mine for more than 25 years.
“We have a lot of loyalty to Arch Coal, and Black Thunder, and the staff, and the higher management,” Lundvall, who now works for a heavy equipment construction company, said. “We couldn’t have asked for a better life.”
Every person in Wyoming has benefited, directly or indirectly, from coal money. But with most of the U.S. electricity sector now building toward a future after coal, Wyoming’s dominance — along with its income — is fading fast. State leaders have tried over and over again to do something more than patch the state economy. Over and over again, those efforts have fallen short.
Wyoming’s adversary isn’t a single political figure. It’s not even a single administration. In its quest to save coal, the least populated U.S. state has instead found itself increasingly at odds with the direction of the national economy. The average American wants coal use, or at least coal’s emissions, to come down.
A long way down
The market for Wyoming’s coal has been shrinking for more than a decade. Production in 2021 barely amounted to half its 2008 peak, and the experts keeping a close eye on state revenue predict that coal yield will halve again before 2030.
Electric utilities across the country have already set plans in motion to eliminate about one-third of the state’s surviving coal demand in those next seven years, a Star-Tribune analysis of publicly announced retirement dates found. Many U.S. coal plants are also likely to see their operations curtailed ahead of, or in place of, retirement.
The White House has changed hands three times since 2008. No federal administration has made much of a difference. Coal markets, buoyed by temporary global factors largely beyond any president’s control, have stabilized more under President Joe Biden than they did under President Donald Trump.
But Wyoming’s coal sales still ceased for good to about a dozen power plants in 2022. Well over 30 more of the state’s legacy buyers are set to shut down this decade. The entire electricity landscape is changing — fast.
In 2008, the U.S. generated just over 48% of its electricity from coal, according to federal data. That share fell to about 22% by 2021, as utilities around the country retired aging coal plants and replaced them mostly with natural gas, wind and solar.
Wyoming tried to resist the shift. But it ships the vast majority of its coal, often upwards of 97%, to the electricity sector. Only a tiny fraction goes to other industrial users.
With the country’s need for coal dwindling, Wyoming’s coal production sank from 467.6 million short tons in 2008 to 238.8 million in 2021. The number of people working at the state’s mines dropped by a third during the same 13-year period.
“The jobs are important,” Barrasso said. “The energy is needed.” His priority, he said, is “to make sure that coal is a viable part of our energy mix long into the future.” It’s a mission most of the state’s voters support, not least because the fate of the Wyoming economy is intertwined with that of the coal industry.
About half of the state’s annual revenue comes from mineral extraction: Roughly one-third each from coal, oil and natural gas, plus a smaller contribution from industries like soda ash and bentonite.
Wyoming’s coal mines pay a state severance tax of 6.5% and a property tax of roughly 6%. Most are located on federal land and subject to a 12.5% federal mineral royalty, of which the state receives just under half. And all the mines pay sales tax on equipment and other purchases.
In the industry’s heyday, the state earned in the ballpark of $1 billion per year just from coal. Coal severance tax revenue alone has dropped by $100 million since 2009. Total losses tied to the industry in each of the last few years reached at least triple or quadruple that toll.
But coal revenue still underpins most state and local functions. It has an outsized role in funding Wyoming’s public education, in large part because, before the 2010s, stable prices kept coal revenue more dependable as an income source than oil or natural gas.
The state also bankrolled school construction using the bonuses coal companies paid when leasing new lands. Coal lease bonus revenue, which peaked above $200 million annually in the early 2010s, enriched school districts across the state. For a while.
“Those have gone away,” said Don Richards, the Wyoming Legislative Service Office’s budget and fiscal administrator. “We don’t anticipate any more in the foreseeable future.”
Lease bonuses were the first thing to go, Richards said — the “canary in the coal mine” for the rest of the state economy.
In the years since coal money started to nosedive, the Wyoming Legislature has taken some steps to diversify the state budget away from coal. It raised hunting fees to help fund the Game and Fish Department and passed a lodging tax to pay for the Office of Tourism. And, Richards noted, it raised the gasoline tax from 14 cents to 24 cents per gallon to support road work.
“Is it making up all of the losses in coal? No,” Richards said. “Is it incrementally shifting the burden of state government costs onto a different set of constituencies, in this case drivers, as opposed to electric generation? Yes.”
The Wyoming Legislature will consider a bill during the upcoming session to restructure education funding and eliminate the historically lease-bonus-funded construction and maintenance account. State lawmakers killed a separate attempt to plug schools’ widening budgetary holes during the 2022 session.
Lawmakers’ efforts have kept the state budget intact, at least in the immediate future, but if new revenue doesn’t materialize and the coal market’s downward trend continues, state leaders will face a difficult choice: raise taxes or make cuts.
Competition and controversy
The coal companies operating in the Powder River Basin face two existential problems: climate change and cost.
Coal’s damaged reputation as a climate pollutant is a source of frustration for many in Wyoming. It’s also rooted in fact. Coal was responsible for about 14% of the carbon dioxide — the world’s most abundant greenhouse gas — released into the atmosphere by the U.S. in 2020, according to federal data. The U.S. produced more carbon dioxide that year than any country except China.
For the world to have a shot at limiting climate change to 1.5 degrees Celsius (2.7 degrees Fahrenheit), a point at which scientists hope will prevent further, uncontrollable warming and escalation of climate impacts like extreme heat waves, droughts and floods, the Intergovernmental Panel on Climate Change, a body of the United Nations, has called for the U.S. and two dozen other countries to end coal use — unless paired with carbon capture — by 2030.