Colorado’s biggest methane emitter may get a discount

In exchange, the state asks a coal mine to trap its gas—but the BLM won’t require it.

 

In western Colorado’s North Fork Valley sits the state’s single largest emitter of methane, a potent greenhouse gas. The West Elk coal mine spews enough methane each year to equal the greenhouse gas pollution of about 90,000 cars, according to government data. For several years, environmental groups and local communities have sought to have the mine’s owner, Arch Coal, capture that methane to use as fuel instead of sending it into the atmosphere. 

Now, as Arch Coal struggles to survive in a declining coal market, it’s asking the federal government to reduce the royalties it pays on some of the coal it extracts. And that could provide a leverage point to finally get the mine to capture its methane. At least that’s the hope of Colorado Gov. John Hickenlooper and some local officials, who want to make methane capture a condition of the royalty cut.

West Elk Coal Mine is Colorado's single largest emitter of methane.
Brooke Warren/High Country News

The Bureau of Land Management is poised to cut Arch’s royalties from 8 percent to 5 percent for a part of the mine where the geology makes extracting coal technically challenging and thus more expensive. The West Elk mine is on federal land, so its royalties are split between the federal Treasury and the state, which shares its portion with local government. Hickenlooper on Friday gave his support for the discount, but with a condition. He wants the mine to commit to developing a strategy to capture its methane. Colorado has led the nation in requiring oil and gas producers to control methane emissions, but has not put similar requirements on coal mines, which aren’t in the business of collecting and selling gas, and have been suffering financially because of a drop in demand for coal.

Although the BLM sought Hickenlooper’s input, the agency says the final decision, which it expects to release within a few weeks, is its own and it won’t require capturing methane as a condition of the discount. “For us, it’s a different issue and it’s not related to the royalty reduction,” says Courtney Whiteman, a BLM spokeswoman.

Hickenlooper’s staff would not comment beyond his letter to the BLM, in which he stressed that his support for the royalty discount is contingent on Arch’s “stated commitment to work collaboratively with Gunnison and Delta Counties, the State of Colorado and others to explore and develop a methane capture strategy at the mine, as well as to explore opportunities to put the methane to beneficial use.”

The coal industry is reeling from competition from cheap and abundant natural gas and declining prices for renewable energy sources like wind and solar. In asking for the discount, Arch said it would allow West Elk to “maximize coal recovery while attempting to remain competitive in the current coal market,” and keep the mine “viable” and its workers employed.

Without the discount, the company might stop extracting coal from the geologically challenging part of the mine, and taxpayers would get no royalties, according to Whiteman. If the BLM approves Arch’s request, its royalty discount would be retroactive to February 2015. The federal government and Colorado, which each get about half of the royalties, would owe the company $8 million for royalties paid on coal already mined. The mine’s discount would apply until 2020 and Whiteman had no estimate of the total savings for the company.

Arch Coal is committed to working with state and local government on ways to analyze and control methane at the West Elk mine, says company spokeswoman Logan Bonacorsi.

But without any deadlines or legal requirements for capture, conservation groups that have worked on the issue for more than a decade are skeptical of the deal. “It’s a classic empty promise from the governor,” says Jeremy Nichols of Wild Earth Guardians. “Sadly, the governor just gave cover to Arch Coal to continue to be subsidized by American taxpayers.”

Conservation groups have targeted West Elk to control its methane because although all coal mines emit methane, West Elk is especially gassy. It also wants to expand into a designated roadless area of Gunnison National Forest, which conservation groups oppose.

They see the discount as a subsidy to mine a dirty fuel that would be better left in the ground. “The markets are already over supplied with low-cost coal. To subsidize something that is too expensive to mine under current market conditions is a waste of public dollars,” says Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis, a clean energy research group.

Most local towns and counties support the discount. But Gunnison County, where the mine is located, withheld its support. In a letter, county commissioners chided the BLM for refusing to provide economic data to justify the discount. 

Still, like Hickenlooper, Gunnison County Commissioner John Messner hopes the royalty discount can be used as leverage to prod Arch to start capturing its wasted methane. Gunnison and neighboring Delta County are organizing a methane working group and hope local mines will join in and develop a strategy to capture methane and use it as natural gas or to produce electricity. Messner sees it as an opportunity to fight climate change while preserving jobs: “It’s a win-win situation,” he said. “You have the opportunity to capture something and utilize it as a fuel source.”

Correspondent Elizabeth Shogren writes HCN’s DC Dispatches from Washington.

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