WyoFile Energy Report

Utility wants to convert Wyoming coal unit to natural gas

Due to the increasing cost of scrubbing pollution from coal-fired power plants and the increasing availability of cheap natural gas, PacifiCorp (which operates as Rocky Mountain Power in Wyoming) plans to convert one-third of its Naughton power plant in western Wyoming to natural gas.

Dustin Bleizeffer

It’s part of a growing national trend, but one that particularly stings here in Wyoming — America’s coal supply powerhouse. Wyoming supplies more than 40 percent of the nation’s coal. Pending regulatory rules to curb greenhouse gas emissions (still years away for existing coal units) is only a minor consideration, according to utility officials.

“The cost differential between emission controls (for coal) and converting (to natural gas) is significant. It’s a better deal for customers,” Rocky Mountain Power (RMP) spokesman Dave Eskelsen told WyoFile.

Exactly how much of a savings, RMP officials aren’t saying.

Natural gas consumption by region 1980-2010

Global consumption of natural gas, 1980-2010 (click to enlarge)

Blame the quantum leap in drilling and completion technology (chiefly hydraulic fracturing — or fracking) for a glut of shale gas in the U.S. market. Natural gas is now barely above $2 per thousand cubic feet (mcf), a basement level price not seen since 2002. It is this free-fall in natural gas pricing — and an outlook that it will linger in the basement — that has greatly accelerated what had been a slow march away from coal among U.S. utilities.

Naughton’s “Unit 3” is the latest chip to fall in a cascade of coal unit retirements and fuel switching that is expected to result in a 10 percent decrease in coal consumption among U.S. utilities this year alone, according to the U.S. Energy Information Administration. RMP, Wyoming’s largest regulated utility, announced years ago it had removed coal from its list of new facilities planning — despite a forecast for steadily increasing electrical demand in the region.

To meeting the demand, RMP expects slightly more hydro-electric and renewable sources in its portfolio of fuels. Coal will continue to lose its share of RMP’s portfolio, while there’s a major push for gains in efficiency, said Rita Meyer, vice president of RMP’s Wyoming division.

Top 8 Coal Producing States

The top 8 coal-producing states (click to enlarge)

The 700-megawatt Naughton coal-fired power plant was constructed in 1963, and consists of three units. RMP officials say the plant will not lose any of its electrical generating capacity by switching to natural gas, and the company says it is gaining a lot of experience in making such conversions.

The current proposal to convert Unit 3 at Naughton is part of an ongoing rate case. The math driving it has little to do with future rulemakings by the U.S. Environmental Protection Agency to curb carbon dioxide emissions. And Naughton is among the existing fleet of coal-fired power plants exempt from EPA’s March rulemaking limiting the volume of CO2 allowed from power plant smokestacks. That rule applies only to new power facilities.

It simply costs too much, according to RMP, to add scrubbers on coal units to meet more stringent standards for nitrogen oxides, sulfur dioxides and particulate matter. The company estimates that by 2014 it will have retrofitted 16 coal units across its service area in the West at a cost of more than $1 billion. And it’s been a major source of irritation for customers.

“We looked at a lot of inputs in making that decision (to convert Unit 3 to natural gas),” said Meyer. “Certainly, in today’s environment, converting to natural gas was the best decision.”

The shift from coal to natural gas provides for an interesting dynamic in Wyoming. Wyoming is the nation’s largest coal producer, and it is among the largest natural gas producers as well.

The biggest utility customers in Wyoming  are in the business of extracting and refining minerals, and the biggest customer in those sectors is natural gas. Wyoming Energy Industrial Consumers, representing major natural gas producers, has intervened in RMP’s recent rate cases, carefully scrutinizing RMP’s choices to make certain rate hikes are justified and minimized.

Wyoming State Geological Services

Electrical Generators across Wyoming (click to enlarge)

It’s also the industry that stands to gain the most in the current national shift from coal to natural gas. And the plot thickens. Natural gas producers in the Pinedale Anticline and Jonah gas fields want to steadily increase drilling operations, but they’re up against an existing non-attainment designation in the Upper Green River Basin (the Naughton power plant resides just upwind of the basin) for emissions that have helped trigger dangerous winter ozone spikes.

Their pitch to squeeze new drilling operations into the existing air emissions in the region? More electricity and less natural gas and diesel to power field operations. EnCana Oil & Gas USA says it’s shopping for 20 megawatts of electricity to power its proposed Normally Pressured Lance field surrounding the existing Jonah gas field. Naturally, EnCana must look to RMP as a potential supplier.

Wyoming politicians have operated under the failed notion that Americans will simply ignore climate change just to preserve the burning of Wyoming coal. But using more natural gas because it’s cleaner (at least at the smokestack) and more affordable — that’s something they get behind. Natural gas has even found an eager partner in wind energy. It will make for many interesting and awkward legislative sessions over the next few years.

Contact Dustin Bleizeffer at 307-577-6069 or dustin@wyofile.com.

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Published on April 12, 2012

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