The nation’s biggest coal mines lay off hundreds of workers

Cheap natural gas is the main culprit, but future job cuts will come from climate change policies.

 

Hundreds of recently laid-off miners and other energy workers gathered at a job fair in Gillette, Wyoming this week, as the community struggled to deal with the first major job cuts at the nation’s largest coal mines.  Arch Coal and Peabody Energy last week laid off 465 coal workers from their Powder River Basin mines.

Experts warn that more cuts could be on the way if forecasts are correct. Western coal production is expected to decline significantly as natural gas, wind and solar produce increasing shares of the nation’s electricity.

University of Wyoming economist Robert Godby estimates that a 17 percent decline in Western coal production this year, as predicted by the Energy Information Agency, could translate into roughly 1,000 layoffs, about twice what’s already been announced. The U.S. government filed briefs this week in a lawsuit that challenges some of the federal coal leases that make up these massive surface mines because of their impacts on climate change. While climate policy did not play a major role in the current layoffs, it looms as a big risk to job security for Wyoming coal workers in the future.

Coal train leaves Powder River Basin coal mine. By Elizabeth Shogren
Coal train leaves Powder River Basin coal mine.
Elizabeth Shogren
Oil and gas booms and busts are nothing new in the West, but “for coal mining it’s been nothing but up for 40 years,” says Godby. “These coal miners, they’ve never had uncertainty in their jobs. This makes it doubly tough.”

What’s behind the layoffs? Demand for coal has been shrinking as low natural gas prices dipped even further, driven down by abundant supply and technological advances in drilling techniques such as hydraulic fracturing. Even bigger layoffs have already hit Appalachia in recent years, where coal prices are higher because mining is more expensive. Electric power stations also have big stockpiles of coal. A warm winter played a role too, by suppressing demand for electricity. All of that has forced down prices to below $10 a short ton for Powder River Basin coal. 

The layoffs are the latest sign of a coal industry that has declined far faster than nearly anyone predicted.  Coal dominated electricity production for decades. But natural gas started beating out coal on a monthly basis starting in April of last year. Both coal and gas produced about one-third of U.S. electricity in 2015. The Energy Information Agency now predicts natural gas will produce more electricity than coal this year.

But the decline in coal isn’t coming fast enough for environmentalists who are fighting in the courts to get the government to keep Powder River Basin coal in the ground.  About 45 percent of the coal used to make electricity is federal coal. Turning coal into electricity produces more greenhouse gases than renewable power or even natural gas, although leaks of methane from gas production and storage add to that fuel’s greenhouse gas footprint.

Until recently, the climate impacts of the federal coal program has been a blind spot of the Obama administration's climate change agenda. Some environmental groups have had a been pushing through the courts to force the federal government to better account for the greenhouse gas emissions that come from burning federal coal. This week the Department of Justice filed a brief defending the Bureau of Land Management's stance in an ongoing court battle over major leases for the same Powder River Basin coal mines that had the big layoffs.

The Sierra Club and WildEarth Guardians are challenging the leases, which would provide Arch’s Black Thunder and Peabody’s North Antelope-Rochelle mines access to up to 2.5 billion tons of coal. At issue is the contention by the BLM that the leases would be unlikely to '“consequentially reduce the overall rate of national coal consumption by electric generators,' and therefore would not appreciably impact the amount of carbon dioxide emitted from U.S. coal generation over the life of the leases," according to a brief filed by the Justice Department this week.

In 2010, BLM concluded that the demand for coal was so great that electric companies would just get their coal elsewhere, a conclusion that the Justice Department brief defended, arguing that it reflected the information available to the agency at the time.

But the environmental groups, who are appealing a lower court’s decision in the U.S. Court of Appeals for the Tenth Circuit, argue that the BLM’s argument defies economic sense, because decreases in coal supply tend to increase price; and increases in coal prices will lead to decreases in coal demand. Godby agrees that the BLM argument seems to overlook the basic rules of supply and demand: “When you take supply out of the market, you increase prices. When prices go up, people buy less.”

Environmental groups also say the leasing could undercut President Obama’s goal to reduce greenhouse gases and Interior Secretary Sally Jewell’s recently launched effort to reform the federal coal program to better reflect its impact on climate change.

“For our climate and our future, the President and Secretary Jewell need to rein in this rogue agency and start keeping our coal in the ground,” says Jeremy Nichols, WildEarth Guardians’ climate and energy program director.

But Harvard economist and former Obama advisor James Stock says the agency's brief clearly was written to defend past action rather than state current administration policy.  In 2010, when the leases were auctioned off, it may have been reasonable for BLM to conclude that electric companies would replace Powder River Basin coal with more coal from elsewhere. “But the world is completely different today,” Stock says. “All of the competitors to coal are a lot cheaper.”  Not only is there abundant low-price natural gas, but wind and solar are also much cheaper than they were.

Godby says there’s a clear connection between the lawsuits, which are driven by concerns about climate change, and future layoffs in the Powder River Basin. While the current layoffs were caused mostly by competition from natural gas, Godby says: “The biggest threat to the Powder River Basin is climate change, in the long term.”

Elizabeth Shogren is HCN's DC Correspondent.