With coal in free fall, Wyoming faces an uncertain future

As demand shrinks and the industry retracts, counties and the state are in an untenable situation.

 

Over the last few months, Wyoming’s struggling coal industry has gone from bad to worse. In May, the third-largest mining company, Cloud Peak, filed for bankruptcy, leaving the pensions and future of hundreds of employees in jeopardy. Less than two months later, Blackjewel, Wyoming’s fourth-largest coal company, abruptly declared bankruptcy, idling mines and putting hundreds out of work.

As the hits against coal pile up, so do questions about the future of Wyoming’s coal mines and the economy they support. With even the Trump administration’s regulatory rollbacks offering no relief, the largest coal-producing state in the country is being forced to grapple with the decline of the industry that has long undergirded its economy.

Cloud Peak Energy’s coal mine north of Douglas, Wyoming. After the bankruptcies of Cloud Peak and Blackjewel, Wyoming politicians are figuring out how to collect back taxes and ensure mine cleanup is completed.
Ryan Dorgan/Casper Star-Tribune via AP

Wyoming’s politicians have gone to considerable lengths to prop up the coal industry. Now, the state is walking an increasingly threadbare tightrope as it manages coal’s future. Lean too far towards promoting mining, with lax tax collection standards and cleanup requirements, and state and local governments may get stuck with cleaning up the mess the failed businesses leave behind. Tilt towards proactive tax collection and strong reclamation requirements, and risk becoming another factor pushing the coal economy into oblivion.

The depth of the current downturn was unforeseen even a couple years ago, said University of Wyoming economist Rob Godby. The Obama administration’s Clean Power Plan, which sought carbon emission reductions from the power sector, was expected to deal the industry only a minor blow, and it was discarded by the Trump administration, anyway. Instead, it was cheap natural gas and to a lesser extent renewable energy sources — and the resulting shrink in demand for coal — that ended up knocking coal companies to their knees, said Godby.

The diminishing value of coal draws ominous parallels to the subprime mortgage bubble that precipitated the Great Recession of 2008. But the coal free fall is likely to be even worse than the housing market crash, because houses always retained some value, while coal mines could end up worthless if investors see costs that outstrip potential income, said energy analyst Clark Williams-Derry of the Sightline Institute, a sustainability think tank.

With mines likely to close, Wyoming is entering a new and untested paradigm for coal — reclamation without production. Typically, mines clean up their mess as they go; if they don’t, then the state can shut down operations until they do. But once a company goes broke and the mine shuts down, the only funds for cleanup are reclamation bonds, which critics say are inadequate in Wyoming.

The Powder River Basin Resource Council has been pushing Wyoming’s Department of Environmental Quality to look harder at the balance sheet of companies before it allows them to buy mines. This effort has kept cleanup obligations from being transferred to Blackjewel and then possibly going unfunded during the company’s bankruptcy. Williams-Derry called that a “heroically smart move,” because now the cleanup costs are staying with the mines’ former owner instead of potentially ending up with the state.

In pushing for strong cleanup requirements, resource council Executive Director Joyce Evans said that requiring mines to do proper reclamation would create more jobs for out-of-work miners. Still, she said she doesn’t expect miners to embrace the prospect, even if the reclamation jobs pay just as well as mining, because of Wyoming’s history of “social dependency on coal and energy.”

Meanwhile, coal’s collapse is delivering a one-two punch of unemployment and unpaid taxes to Campbell County, where more than one-third of all coal in the U.S. is mined from the Powder River Basin. The Blackjewel bankruptcy put nearly 600 miners out of work, and the county may never get $37 million in taxes owed by the company, which was run by Appalachian coal executive Jeff Hoops. This is partly because of the county’s lenient approach to collecting back taxes. “We’ve been dealing with delinquent taxes and Mr. Hoops for several months in an amicable way to try and resolve (the unpaid taxes) without pushing them into what has happened now and keep our miners working,” said County Commissioner Del Shelstad in a July 3 meeting in Gillette.

Now, creditors are in line before the county to collect in bankruptcy court. For Gillette’s state Sen. Michael Von Flatern, an ex-coal miner, the delayed county tax payments and ongoing dependence on minerals “is starting not to make sense.” He described the current bankruptcies as the canary in the coal mine for the industry’s long-term decline. “We need to truly diversify our economy,” Von Flatern said. “We have a minerals, minerals, minerals economy.” But over next couple decades, it’s possible that there won’t be a market for Wyoming coal anymore, he said. “If Wyoming can’t do what we need to do to diversify our economy and change our tax structure, then we’ll be in the same place next time we go bust.”

Carl Segerstrom is an assistant editor at High Country News, covering Alaska, the Pacific Northwest and the Northern Rockies from Spokane, Washington. Email him at [email protected] or submit a letter to the editor

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