4 Things You Need To Know About Wyoming’s Coal Future

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Godby et al.

This chart shows possible changes in Wyoming coal production if the Clean Power Plan, also called 111(d) is implemented. The blue and green lines are "reference scenarios," or what coal production is expected to be without the Clean Power Plan. The red and black dotted lines, along with the solid dark grey line, examine the impact of a carbon tax, something that is often discussed as an alternative to the Clean Power Plan. The scenarios labeled 111(d) model the effects of the Clean Power Plan, with and without regional cooperation and energy efficiency.

This week, researchers at the University of Wyoming offered a preview of a major new study that details potential threats to Wyoming’s coal industry. The final version won’t be out until the end of the month, but lead author Rob Godby sat down with Inside Energy for an interview. He described his reaction to the results as “the guy looking into the telescope and the being the first one to see the asteroid.” Here are the highlights:

1. The EPA’s Clean Power Plan is the biggest threat to Wyoming coal production

Wyoming politicians have been saying that ever since the Obama administration rolled out the plan, which aims to cut carbon emissions from the power sector 30 percent by 2030. Now we have data to back it up. Even the best-case scenarios modeled by the UWyo team look pretty grim. Godby says Wyoming production could fall anywhere between 30 and 50 percent, depending on whether states and regions work together to implement the plan, and whether energy efficiency is counted. On-the-ground, the projected cuts translate to between 7,200 and 9,000 jobs.

This chart shows possible changes in Wyoming coal production if the Clean Power Plan, also called 111(d) is implemented. The blue and green lines are "reference scenarios," or what coal production is expected to be without the Clean Power Plan. The red and black dotted lines, along with the solid dark grey line, examine the impact of a carbon tax, something that is often discussed as an alternative to the Clean Power Plan. The scenarios labeled 111(d) model the effects of the Clean Power Plan, with and without regional cooperation and energy efficiency.

Godby et al.

This chart shows possible changes in Wyoming coal production if the Clean Power Plan, also called 111(d) is implemented. The blue and green lines are “reference scenarios,” or what coal production is expected to be without the Clean Power Plan. The red and black dotted lines, along with the solid dark grey line, examine the impact of a carbon tax, something that is often discussed as an alternative to the Clean Power Plan. The scenarios labeled 111(d) model the effects of the Clean Power Plan, with and without regional cooperation and energy efficiency.

 

2. Rising production costs for coal pose a separate, but potentially serious, threat to Wyoming coal

Separate from the potential of new regulations, the UWyo study found that Powder River Basin coal’s market fundamentals are shakier than many previously thought. The researchers looked at the threats posed by cheap natural gas (which is also used to generate electricity), low electricity demand (it’s leveled off nationwide in recent years) and rising costs for coal production. That last one turns out to be the biggest potential problem for PRB coal producers. Godby says coal companies need to continue improving their efficiency because, if natural gas and renewables increase theirs more quickly, PRB coal stand to lose a lot of market share. In the worst-case scenario, rising coal production costs could result in a 20 percent cut in PRB coal production by 2030. That in turn translates to as many as 4,000 jobs.

This chart shows possible changes in Wyoming coal jobs, under a variety of scenarios. A scenario where coal costs rise faster than competing energy technologies results in the largest job losses.

Godby et al.

This chart shows possible changes in Wyoming coal jobs, under a variety of scenarios. A scenario where coal costs rise faster than competing energy technologies results in the largest job losses.

 

3. Increased natural gas production will not make up for losses in the coal sector if the Clean Power Plan is implemented

It’s often posited that the Clean Power Plan might be neutral for Wyoming, because as coal-fired power plants are shut down, they’ll be replaced by natural gas plants — and Wyoming has plenty of natural gas. But the UWyo analysis shows that while increased natural gas production could partially offset a decline in coal, it would only be partial. Godby says natural gas gains could make up between 30 and 40 percent of coal losses — likely cold comfort to job seekers and state policymakers alike.

This chart shows the potential changes in employment if the Clean Power Plan, also called 111(d), is implemented. The four different scenarios contemplate the effects of regional and national cooperation and energy efficiency.

Godby et al.

This chart shows the potential changes in employment if the Clean Power Plan, also called 111(d), is implemented. The four different scenarios contemplate the effects of regional and national cooperation and energy efficiency.

 

4. Exports could go a long ways towards offsetting decreased production because of costs and/or the Clean Power Plan, but they’re looking increasingly unlikely

As domestic coal consumption has declined in recent years, Powder River Basin coal companies have turned to foreign exports — mostly to Asia — as a potential source of revenue. Right now, only about 3 million tons of Wyoming coal gets sent overseas, but if two proposed port projects in Washington are built and a port expansion in British Columbia is completed, there would be capacity for up to 100 million tons. The UWyo researchers modeled what kind of impact that would have on Wyoming coal production and found it could add about $1.2 billion annually to the state economy, along with 4,000 jobs. There are big caveats though about whether that will ever happen. International “seaborne” coal prices today are half what they were just a few years ago, which could mean it may become no longer profitable to export PRB coal. There’s also considerable opposition to the proposed ports in Washington, which may be difficult to overcome. So, while exports would help mitigate some of the threats to Wyoming coal, they’ll have to overcome some significant headwinds first.

To sum up the study: the future isn’t looking great for Wyoming’s coal industry. Extending his asteroid metaphor, Godby concluded: “If the regulations come in, Wyoming will have to adapt. And hopefully we’re not like the dinosaurs.”