Now that the legislative session has ended, lawmakers meet periodically to discuss issues they need to address in the upcoming session. One of the topics of the recent meeting was the difficulties facing the coal industry, with big requests from industry representatives and bleak updates from utilities currently reliant on the energy source.
“I’m trying to survive.”
Travis Ditty, executive director of the Wyoming Mining Association (WMA), did not mince words at the May 9 Interim Committee meeting of the Joint Legislative Committee on Minerals, Business and Economic Development. Notably, this was before the Bureau of Land Management (BLM) recently announced its draft plan to end new coal mining in the Powder River Basin, which is Wyoming and the nation’s most coal-producing region.
“These are difficult times,” Deti said. “Things are tough. Market conditions are tough.”
That’s because Wyoming’s coal production has nearly halved since 2008. The state still supplies about 40 percent of the nation’s coal, but some analysts expect more furloughs and mine closures. Compared to this time last year, production is down 20 percent.
So Deity asked lawmakers for tax breaks on mining equipment, such as haul trucks, shovels and bentonite excavators. He also called for another exemption from the end-of-service tax, and a reduction in the rate from 7% to 6.5%, which is paid by the oil and gas industry.
Rep. Cyrus Western (R-Big Horn) questioned the latter.
“We have just reduced the severance tax rate in mining,” he told Deti. “It’s a savings of about $50 million a year. What were companies doing with that $50 million?”
“That’s a great question. “I’m trying to survive,” Deity answered frankly.
Rep. Martha Lawley (R-Worland) summarized what Deity asked them to do.
“Are you proposing all this relief, or an either-or? Either a tax credit approach, or a severance tax reduction approach?” Deity asked.
“My membership directed me to order the whole shebang,” Deity replied.
Lawmakers expressed sympathy but said the issue was better suited to be taken up by their colleagues on the Interim Joint Revenue Committee. However, they left open the option to revisit the issue if revenue doesn’t pick it up.
“What is the cost if we do nothing?”
But that was not the end of the coal talk.
In the midst of the three-day commission meeting, Wyoming announced it was joining about two dozen other states suing the Environmental Protection Agency (EPA) over new rules that Wyoming Gov. Mark Gordon said would “destroy” the coal industry. Under the new rules, coal plants will be required to reduce emissions by 90% by 2032.
Suing the federal government to save the coal industry is a familiar strategy in Wyoming, according to Gordon’s policy director.
“Litigation, litigation, litigation — that’s what we do. We don’t hesitate to file lawsuits,” Randall Luthi told lawmakers, adding that the state currently has signed on to 54 natural resource-related cases. Additionally, Wyoming has indicated it will likely challenge Proposed BLM plans that would put an end to new coal leasing in the Powder River Basin.
Luthi admitted to the committee that coal was declining before the EPA’s new rules were announced. He pointed to the high amount of carbon dioxide emissions released by coal, which is a greenhouse gas.
“It doesn’t matter what you believe in terms of climate change. It doesn’t matter what you think (about) the amount of carbon dioxide needed in the atmosphere,” Luthi said. “Our customers are saying we want a lower CO2 fuel source. Frankly, we can either provide it or other countries will.
Caitlin Tan
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Wyoming Public Media
But Luthi said this need not be achieved through renewable or low-CO2 sources alone. Coal could also be a low-CO2 energy source if carbon capture technologies, which Wyoming is helping to develop, are used, he said. In theory, this technology captures carbon from the coal production process and prevents emissions from entering the atmosphere. But in practice, this has not yet been proven on a commercial scale, and is expensive to implement. Some estimates have shown costs of up to $1 billion to install this technology on a single coal unit.
But Luthi responded: “If you build one, the cost is high. If you build two, the cost is lower. If you build 10, the cost is much lower.”
PacifiCorp, the parent company of Rocky Mountain Power and Wyoming’s main electricity provider, has 11 coal-fired power generation units in the state and plans to retire them by the end of the 2030s. But Wyoming hopes carbon capture will make it last longer, which Luthi said is a worthwhile trade-off, even if the technology is expensive.
“But what is the cost if we do nothing? We have coal mines that could stop working.”
Sen. Donald Burkhart (R-Rollins) is the committee’s co-chair and echoed that sentiment. He used the city of Hana, Wyoming, as an example, which once had five mines.
“They don’t have anything now,” he said. “And look at what the city looks like (now).” They had a medical clinic. They had grocery stores and a bunch of other things.
Now, Hanna’s population is less than 700 people. One of the only businesses is an entertainment center that is struggling to make ends meet. Burkhart mentioned other communities that faced a similar fate, such as Encampment, Rock River and Medicine Bow.
“It’s empty now because all those jobs are gone,” Burkhart said. “This is what it will look like if we don’t keep our coal resources up and running.”
Low cost, less risk and reliability
And state legislators know that. In fact, Wyoming law requires utilities to at least explore the option of retrofitting carbon capture in their coal plant units, something both Rocky Mountain Power and Black Hills Energy are currently doing. Taxpayers already pay a small surcharge to help pay this amount.
But the prospects for widespread implementation to stave off coal’s downward trend are uncertain, especially with Rocky Mountain Power, which serves customers in six states – California, Idaho, Oregon, Utah, Washington and Wyoming. These states do not all have the same energy goals, which makes sharing costs across customer bases complex.
“If you have a large system, you can distribute the cost more fairly and the burden more equitably across the system,” Rocky Mountain Power President Dick Garlisch told lawmakers during his update.
This has worked well for a long time, he said, adding that all states have the same energy policy: low cost, less risk and reliable.
“And what’s more, all of these words meant the same thing to everyone,” Garlisch said. “Where we are today is none of these things mean the same thing to everyone anymore.”
Some states in the system, such as California, Oregon and Washington, are setting their sights on renewables and phasing out coal, he said. Others, such as Utah and Wyoming, are looking to capture carbon to save coal.
“It’s been a challenge for us to balance those two things and continue to provide affordability to customers, including developing new technologies,” Garlisch said.
Notably, the company proposed historic interest rate increases for Wyoming customers last year, which regulators reduced to about 8 percent. More increases could come this year.
Carbon capture may not be the cheapest option for customers, Garlisch said. More planning and research needs to be done.
But Garlisch also said that’s not the only challenge. More wildfires destroying infrastructure and causing lawsuits against the company, along with federal policies that could lead to coal plant closures, are all very bleak for the utility. He added that all of this is reflected in their credit rating.
“Right now, I think we are two steps above junk status in our credit rating, and that translates directly to customer billing,” he said.
This is because their business model relies on easy access to capital, without which customer bills rise, Garlisch said.
To sum it up, Garlisch said the current system is not working.
“Just to be honest, we can’t all continue to live the way we do here,” he said of the Six Nations system. “We face increasing costs for the services we provide, and increasing pressure to recover those costs, and countries have appropriately asserted themselves and what they want their energy policy to be.”
He explained that he doesn’t think this means Wyoming should abandon the system, but that states, or at least some of them, need to work together.
“I think Utah, Idaho and Wyoming share some of the same values in the Intermountain West. Reliability means a lot of the same things to those people in those areas than it does on the other side (California, Oregon and Washington),” Garlisch said. “So I think there might be opportunities.” To work with people who are aligned with the policy.”
He pointed to a new law passed in Utah that could ease some of the tension. It is a self-insurance plan for utilities that is partially funded by Utah customers, and can be used to pay wildfire damages against the company.
Wyoming lawmakers will consider creating similar legislation at their next committee meeting on July 30-31.
