Sept. 16 (UPI) — The national slowdown in demand for coal is being felt especially hard this summer in Wyoming’s Powder River Basin, where four of the state’s biggest coal mining companies went through a lockout, bankruptcies and a merger within a few months.
The changes have been hard on employees in Campbell County, and new federal reports have caused uncertainty about the future of coal in the region.
Demand for coal is dropping as more coal-fired power plants go offline and the price of national gas and renewable energy falls, according to a recent report by the U.S. Energy Information Administration.
Clean-burning, low-sulfur, inexpensive coal of the Powder River Basin has been a driver of the state’s economic engine for more than 30 years, but the national demand for all coal has dropped to its lowest levels since 1979, the information agency said.
The Powder River Basin region supplies 43 percent of the entire U.S. coal supply, but the region has been pumping out a 30 percent surplus supply of coal.
At the same time, the electric power sector has slimmed down coal consumption over the last 10 years 28 percent in 2018 from 48 percent in 2008. More than 540 coal-burning power plants have been shuttered during that time.
The information agency expects another 4 percent of coal-burning plants to close by 2020, pushing the demand for Wyoming-region coal down another 12 percent.
The human toll of this squeeze is being seen in towns like Gillette, Wyo., population 32,000, in the state’s northeast corner and about an hour from Wyoming’s iconic Devil’s Tower rock formation.
About 600 Wyoming-based employees were locked out of the region’s third-largest mining operation, Blackjewel LLC, when it closed July 1 and filed for bankruptcy. More than 1,000 other employees were locked out in Kentucky, Virginia and West Virginia.
The company filed a motion with the U.S. Bankruptcy Court in late August to terminate its medical insurance coverage for those workers.
“There are still jobs in the area,” said Gillette’s Mayor Louise Carter-King, who characterized Blackjewel’s bankruptcy and lockout as the result of “bad management.”
Many of the mine’s employees were waiting for it to reopen, hoping not to lose seniority and vacation time, Carter-King said. Some were not paid for their final weeks of work.
“If anybody wants my advice, I’d say look for a better job,” she said. One out of every 10 households in the region has a member employed in the coal industry.
But the long-term economic prospects of the area may get worse before they get better, said Robert Godby, associate professor of economics and director of the Center for Energy Economics and Public Policy at the University of Wyoming.
Along with the lockout, a second area coal company, Wyoming-based Cloud Peak Energy, filed for bankruptcy in May, and its distressed assets were sold this month to Navajo Transitional Energy Co. for a significantly reduced price.
“Demand is falling, prices are flat and there is overcapacity,” Godby said.
Two of the basin’s other biggest companies, and former competitors, Arch Coal and Peabody Energy, announced a merger this summer.
“When two of the region’s biggest and strongest companies have to merge, what that tells you is that conditions in Powder River Basin are making it hard to make money, so even the strongest companies have to merge to combine forces,” Godby said.
The county and the state are impacted when coal companies go under, as bankruptcy creditors are ahead in line to be paid over the local property taxes on extracted resources.
Blackjewel was at least $37 million in arrears in property taxes to Campbell County, when the company locked the gates of Eagle Butte and Belle Ayr mines in July, the county said.
Cloud Peak owed the county about $25 million in property when the company filed for protection under Chapter 11 of the federal bankruptcy statute. Officials don’t know if they’ll ever see the money.
To make the region profitable again, economic pressure and paper-thin profit margins suggest that at least some of the mines should close, Godby said.
But the companies are engaging in a game of chicken because no one wants to pay for the cost of remediation of a closed mine, he said.
“The company basically has to return the landscape to the way it was before the mine,” Godby said. “Mines close all the time, but no one wants to close mines and pay the very high cost, because you won’t have any revenue to offset that.
“So everyone has an incentive to wait for everyone else to close. But that’s the only thing that will help the whole region become more profitable.”
The coal companies in the area must do some further shrinking before they can become profitable again, Godby theorizes.
“Coal is a mature industry in decline, but there is still a place for coal in the basin if they can reduce overcapacity, firm up prices and make more revenue from their remaining customers.”
Coal in the Powder River Basin is still high-quality and much cheaper to produce than elsewhere in the United States.
Geological forces pushed large, wide veins of coal close to the earth’s surface, making them easy to extract with large-scale strip mining. Wyoming coal sells for $13.31 per short ton, according to the information agency, while other mines across the country must sell their coal for $30 to $40 per ton to cover extraction costs.
Meanwhile, the city of Gillette and Campbell County are making plans to diversify the economy by investing in high-tech research for other uses for coal and carbon.
Wyoming invested $15 million in the Wyoming Integrated Test Center near Gillette. The center captures carbon emissions from flue gas at the Dry Fork Station, a 422-megawatt power plant, for research on reuse of carbon.
The county also is building a Carbon Products Testing Center it hopes will be an innovation hub for new uses of the basin-area’s rich carbon resources.
Years of economic boom from the area’s coal industry has left the town with “great infrastructure,” Mayor Carter-King said. “We have plenty of water, we own our own power, our streets are great and we have an airport. There’s a lot of positivity and a lot of exciting things that are happening here. We are set up.”