Even though Wyoming coal production has increased, experts say the industry is set to decline
Wyoming’s coal industry has experienced an uptick in production over the past two years, a trend that is likely to continue into 2022. But energy industry experts say that uptick is only temporary.
Historically, coal has been one of the state’s most reliable and long-lasting energy industries, with roots that pre-date statehood. After reaching peak production figures in the late 2000s and early 2010s, coal production has steadily decreased over the last decade, with national production hitting a 50-year low in 2020.
“Going into about mid-year [of 2021], suddenly we had a real boom, relatively speaking,” said University of Wyoming energy expert Rob Godby. “As the summer was hot, the need for electricity went up. As the economy rebounded, that demand was supplied by coal because it is just cheaper to produce electricity from coal than it is from current natural gas prices.”
But even with increased coal production, figures are a far cry from where they once were.
“If you had told somebody that in 2021 coal production in Wyoming would be around 230 million tons, that would be considered almost catastrophic, especially three or four years ago,” Godby said. “The fact that we see that as a good year just tells you how far coal has dropped in the past decade—that’s half of what we were producing a decade ago.”
But while production numbers continue to rise, slowing the industry’s downward trajectory, the forces acting on the coal industry have remained relatively consistent.
“The factors that were causing the downward trend prior to COVID are still there,” Godby said. “They haven’t changed long-term. And so that structural decline is anticipated to continue once the pandemic is over or markets normalize in response to economic recoveries and a social ability to deal with COVID.”
How long the increased production will continue and how much further the coal industry may decline has yet to be seen. But even with more electric companies and countries around the world incorporating carbon-free or less carbon intensive energy sources into their power generating repertoire, there is a possibility that coal may remain more viable in certain places, including parts of Wyoming.
“It’s [coal] far less important than it has been on the grid in the past. It could supply as much as five, maybe even 10 percent of total electricity [in future years], but it really depends on what types of emission controls are employed,” Godby said. “This probably would happen regionally [and] locally in places where you have a power plant that you can locate next to a very cheap source of coal, like in the Powder River Basin, where you can compete with natural gas and renewables, even if you have to implement emissions control technology.”
Carbon capture and sequestration technology has brought optimism to what coal may be able to offer in coming years, but these technologies aren’t fully implemented or proven.
“In Wyoming, we’ve thought of carbon capture as a way to save coal, but literally they are two separate technologies,” Godby said. “Carbon capture may develop for uses elsewhere regardless of what the outlook is for coal because it could be applied to cement production, to natural gas [for] electricity production. Those opportunities are probably more lucrative than trying to make a coal-fired power plant competitive.”
Pollution concerns have been a significant part of the clampdown on coal in recent years. According to Godby, coal produces twice the amount of greenhouse gases than natural gas does for the same amount of energy. The concerns are seen worldwide, and make the realities of coal less attractive, especially in areas that already suffer from high levels of pollution.
“The policy need to do something about greenhouse gasses has really clouded the future for coal,” Godby said. “The only way to really control those greenhouse gas emissions is to use an unproven technology like carbon capture—which is also very expensive.”
The economics of these technologies also poses issues for coal as well, Godby claims.
“If you were to use coal with carbon capture, it only makes it less economically competitive,” he said. “We expect coal to really decline in the marketplace, especially if greenhouse gas measures are put in.”
Additionally, there are future scenarios in which coal is entirely phased out.
“The Biden administration has suggested that they would like to see a policy of all coal on the grid eliminated by the 2030s,” Godby said. “Whether that could come to pass or not remains to be seen, but of course just the threat is really a problem for coal.”
A coal moratorium was implemented during the Obama administration in 2016 that aimed to freeze coal leases on federal lands, citing pollution concerns. This was repealed in 2017 during the Trump administration, a policy which has continued into the Biden era.
During the industry slowdown in the 2010s, coal exports were once considered a potential saving grace for Wyoming coal, especially coal from the Powder River Basin. Though China was thought to be the best potential customer, Godby said the circumstances that once led to optimism have dissipated. He added that China’s adversarial relationship with the U.S. also complicates matters and now it’s not the market it was thought to be five to eight years ago.
“There are other places that produce coal that can just geographically compete against the United States,” he said. “We [the U.S.] don’t have coal ports and there’s probably no chance that they’re going to be built on a scale that would make a difference. The major coal port projects that were proposed in the last decade are now all canceled, and you really can’t find the investor backing to take that kind of risk.”
Though the U.S. lacks export capacity, other Asian countries offer possible opportunities, though it’s still somewhat questionable as to their future viability as lucrative markets.
“The export destinations, if they ever come to be, are probably Japan and [South] Korea,” Godby said. “Both of those countries have made some investment in recent coal plant construction. Japan has plants underway and new plants planned. The idea is that they would be coal-fired power plants for a few decades and then they would be converted to hydrogen.”
Japan’s desire for outside fuel sources has been well noted, according to Godby.
“Japan has always been very concerned about diversifying its coal sources,” he said. “And so American coal, to the degree they can get it out of the Powder River Basin, is very lucrative, and it could be shipped out of ports in Canada in Vancouver.”
But if coal exports are going to be lucrative, Godby thinks it may be because of South Korea.
“There hasn’t been a huge trade in coal [with South Korea], but it has occurred, and it’s been very lucrative,” he said. “Typically, those exports are very volatile. The reason they’ve been affordable this year, or at least competitive, is because natural gas prices, again, are high. They’re not importing things like liquified natural gas because it’s very expensive, and so coal prices on the international market have been through the roof.”
But this market is highly unstable.
“They can fall by 50 percent and then rise 100 percent,” Godby said. “They’ll fall as low as $60, sort of around that range. More recently those prices have been above $100. That sort of volatility makes a very risky market.”
Despite current international market trends, the potential of large-scale coal exports is minimal.
“Exports probably aren’t likely to happen, and if they are, it’ll be limited quantities possibly to partners like Japan who are willing to pay potentially a premium for that because they have national security concerns,” Godby said.
He said Wyoming will continue to feel the fluctuations and reverberations of both global and domestic energy trends for years to come.