Lawmakers Hear Grim Updates From The Coal Industry and Electric Utilities

Lawmakers Hear Grim Updates From the Coal Industry and Electric Utilities

Wyoming Public Radio | By Caitlin Tan, Published May 21, 2024 at 12:38 PM MDT

The Powder River Basin is the top coal producing region in the nation.

Now that the legislative session is over, lawmakers are meeting periodically to discuss what issues they need to address next session. A theme from a recent meeting was the coal industry’s hardships, with big asks from industry representatives and grim updates from utilities that currently depend on the energy source.

“Trying to stay alive.”

Travis Deti, executive director of the Wyoming Mining Association (WMA), didn’t mince words at a May 9 Joint Legislative Minerals, Business and Economic Development Interim Committee meeting. Notably, this was before the recent Bureau of Land Management (BLM) announcement of its draft plan to end new coal mining in the Powder River Basin, which is Wyoming and the country’s top producing coal region.

“These are tough times,” Deti said. “Things are difficult. Market conditions are tough.”

That’s because Wyoming coal production has almost halved since 2008. The state still supplies about 40 percent of the nation’s coal, but some analysts project more furloughs and mine closures are to come. Just compared to this time last year, production is down 20 percent.

So Deti asked lawmakers for tax credits on mining equipment, like haul trucks, shovels and bentonite drills. He also asked for another severance tax break, dropping the rate from 7 percent to 6.5 percent, which is what the oil and gas industry pays.

Rep. Cyrus Western (R-Big Horn) questioned the latter.

“We just lowered the severance tax rate for mining,” he said to Deti. “It’s savings of about $50 million a year. What have the companies been doing with that 50 million?”

“That’s a great question. Trying to stay alive,” Deti replied frankly.

Rep. Martha Lawley (R-Worland) recapped what Deti was asking them for.

“Are you proposing all of this relief, or an either-or? Either a tax credit approach, or a reduction of severance tax approach?” she asked Deti.

“My membership has directed me to ask for the whole shebang,” Deti replied.

The lawmakers were sympathetic but said the issue was a better fit to be taken up by their colleagues on the Joint Revenue Interim Committee. However, they left the option open to revisit the issue if Revenue doesn’t pick it up.

“What is the cost if we do nothing?”

But that wasn’t the end of the conversation on coal.

In the midst of the three-day committee meeting, Wyoming announced it’s joining about two dozen other states suing the Environmental Protection Agency (EPA) over new rules that Wyoming’s Gov. Mark Gordon said will “destroy” the coal industry. Under the new rules, coal plants would be required to slash emissions by 90 percent by 2032.

And suing the federal government to save the coal industry is a familiar strategy for Wyoming, according to Gordon’s policy director.

“Litigate, litigate, litigate – that is what we do. We don’t hesitate to litigate,” Randall Luthi said to lawmakers, adding that the state is currently signed on to 54 cases that involve natural resources. Additionally, Wyoming has indicated it will likely challenge the proposed BLM plans that would put an end to new coal leasing in the Powder River Basin.

Luthi acknowledged to the committee that coal was declining before the EPA’s new rules were announced. He referenced coal’s high amount of carbon dioxide emissions, which are a climate warming gas.

“It doesn’t matter what you believe as far as climate change. It doesn’t matter what you believe [about] how much CO2 is needed in the atmosphere,” Luthi said. “It’s our customers saying we want a source of lower CO2 fuel. And frankly, we can either supply it or other states will.”

Five men stand in front of carbon capture infrastructure on a cloudy day.

Caitlin Tan/Wyoming Public Media

Governor Gordon, left, listens along with others, to test center technical director Will Morris, second to right, explaining the carbon capture testing facility near Gillette.

But Luthi said this doesn’t need to be accomplished through only renewable or low CO2 sources. He said that coal can also be a source of low CO2 power if carbon capture technologies, which Wyoming is helping to develop, are used. In theory, the tech captures carbon from the coal production process and prevents emissions from entering into the atmosphere. But in practice, it’s still not proven on a commercial scale and it’s expensive to implement. Some estimates have shown costs as high as $1 billion to install the technology on a single coal unit.

But Luthi pushed back, saying, “If you build one, the cost is high. If you build two, the cost is less. If you build 10, the cost is far less.”

PacifiCorp, Rocky Mountain Power’s parent company and the main electricity provider in Wyoming, owns 11 coal fired power plant units in the state, and has plans to retire them by the end of the 2030s. But Wyoming is hoping carbon capture could keep them going much longer, which Luthi mentioned is a worthy trade-off, even if the technology is expensive.

“But what is the cost if we do nothing? We have coal mines that could go out of business,” he said.

Sen. Donald Burkhart (R-Rawlins) is the co-chairman of the committee and echoed this sentiment. He used the town of Hanna, Wyoming, as an example, which once had five mines.

“They have none now,” he said. “And see what the town looks like [now]. They used to have a medical clinic. They used to have grocery stores and a bunch of other stuff.”

Now, Hanna has a population of less than 700 people. One of the only businesses is a recreation center that’s struggling to make ends meet. Burkhart mentioned other communities that have had a similar fate, like Encampment, Rock River and Medicine Bow.

“It’s empty now because all those jobs went away,” Burkhart said. “That’s what it looks like if we don’t keep our coal resources up and running.”

Low cost, least risk and reliability

And state lawmakers know this. In fact, Wyoming law requires public utilities to at least explore the option of carbon capture retrofitted on their coal plant units, which both Rocky Mountain Power and Black Hills Energy are in the midst of doing. Ratepayers are actually already paying a small surcharge to help pay for this.

But the likelihood of widespread implementation to stave off coal’s downward trend is uncertain, specifically with Rocky Mountain Power, which serves customers across six states – California, Idaho, Oregon Utah, Washington and Wyoming. These states don’t all have the same energy goals, which makes cost-sharing across customer bases complicated.

“If you have a big system, you can spread the cost equitably and the burdens more equitably across the system. And that’s resulted in lower rates for customers,” Rocky Mountain Power President Dick Garlish said before lawmakers during his update.

He said for a long time that’s worked well, adding that all the states had the same energy policy: low cost, least risk and reliability.

“More than that, all those words meant the same thing to everybody,” Garlish said. “Where we are now today is none of those things mean the same thing to everybody anymore.”

He said some states in the system, like California, Oregon and Washington, are setting their sights on renewable energy sources and phasing out coal. Others, like Utah and Wyoming, are looking toward carbon capture to save coal.

“And that’s been a challenge for us to balance both of those and still come up with the affordability for customers, including advancing new technologies,” Garlish said.

Notably, the company proposed historic rate hikes to Wyoming customers last year that regulators whittled down to about 8 percent. More increases could be coming this year.

Garlish said carbon capture might not be the most affordable option for customers. More planning and research needs to be done.

But Garlish also said this isn’t the only challenge. More wildfires that decimate infrastructure and cause lawsuits against the company, along with federal policies that could lead to coal plant closures, are all pretty grim for the utility. He added that it’s all reflected in their credit rating.

“Currently, I think we’re two steps above junk status on our credit rating and that translates directly to customers’ bills,” he said.

Garlish said that’s because their business model depends on easy access to capital and without that, customers’ bills go up.

To sum it up, Garlish said the current system isn’t working.

“Just to be blunt, we all can’t keep living the way we’re living here,” he said about the six-state system. “We’re facing increasing costs for the services we provide, increasing pressure to recover those costs, states have asserted themselves appropriately and what they want their energy policy to be.”

He clarified he doesn’t think that means Wyoming should ditch the system, but that the states, or at least some of them, need to work together.

“I think that Utah, Idaho and Wyoming share some of the same values in the Intermountain West. And reliability means a lot of the same things to those folks in those regions than it does on the other side [California, Oregon and Washington],” Garlish said. “And so I think there might be opportunities to work together with folks that are aligned on policy.”

He pointed to a new law passed in Utah that could alleviate some stress. It’s a self-insurance plan for the utility funded partly by Utah customers, and can be used to payout wildfire claims against the company.

Wyoming lawmakers will consider creating similar legislation at their next committee meeting July 30 and 31.