Costly life support for dying coal industry hits Wyo wallets

Today the Capitol welcomes 93 legislators, all actors in a classic play Wyoming has watched for years. When they leave in March, most of the cast will believe they’ve put on a marvelous show if they reject all tax increases, bash the feds while keeping their hands outstretched for more money and giving another giant boost to the wounded coal industry.

When the curtain closes lawmakers will wait in the wings, ready to be showered with rapturous applause from a grateful audience.

But a few of us will squirm in our seats, knowing this show can’t go on forever without a massive rewrite of a worn-out script. A 0.3% surcharge for Wyoming power customers that will raise $2 million this year just to study one dubious, desperate answer to the coal industry’s problems is a harbinger of the harm that could come.

The play’s final act now relies on the introduction of an industry savior, a character that hasn’t been successful even with billions of federal dollars spent for research in Wyoming and other states: carbon capture utilization and storage to retrofit coal-fired power plants being retired.

Wyoming relies on fossil fuels to generate about 60% of state and local revenues, a tax system rooted in unfettered optimism since the early 1980s, when coal was king. There have been booms and busts, but Wyoming’s coal production peaked at 468 million short tons of coal mined in 2008.

The state’s production then plunged annually until it hit a low of 218 short tons in 2020. It was caused by cheaper, plentiful natural gas; even less expensive renewable energy, like wind and solar; and the closure of coal-fired power plants across the nation as states passed laws to reduce carbon emissions killing the planet.

A small uptick caused mostly by rising gas prices has boosted Wyoming’s mineral tax revenue, but state economic forecasters say it will only last a few more years. Wyoming must restructure its tax system and diversify the economy away from minerals, but legislators insist on only propping up coal.

Lawmakers depended on a coal export terminal in Washington state to bring Powder River Basin coal to Asian markets, but the company that planned to build it went bankrupt. Wyoming claimed other states’ vehement opposition violated the Constitution’s Commerce Clause and sued, but state and federal courts sided with defendants. In June 2021, the U.S. Supreme Court refused to hear Wyoming’s final appeal.

Public funds paid for that failed lawsuit, and state lawmakers once again want the people of Wyoming to pay to keep the coal industry on life support by studying carbon capture utilization and storage. 

CCUS has been on the drawing board for decades as a way to reduce emissions, but not a single U.S. project has been developed that’s commercially viable. That’s not likely to change, no matter how many laws Wyoming passes.

In October 2019, Rocky Mountain Power announced plans to retire units at two of its Wyoming power plants ahead of schedule. The Legislature said no, utilities must try to sell the plants and keep them operating, plus buy the electricity at whatever rate the new owner wants to charge!

A year later, Wyoming mandated utilities must generate at least 20% of their power from coal plants retrofitted with CCUS technology. But don’t be fooled: Lawmakers aren’t motivated to fight climate change. Their goal is to revive coal and use the captured carbon for enhanced oil recovery.

Rocky Mountain Power and Black Hills Energy told the Public Service Commission in 2022 the law would force them to significantly raise rates paid by Wyoming customers.

Rocky Mountain estimated the four units in its immediate plans would cost between $400 million and $1 billion to retrofit. Black Hills said its two units would cost a combined $980 million.

None of the costs to analyze or implement these changes can be borne by ratepayers outside the state, so Wyoming customers must absorb them. If it’s cost-prohibitive, companies may be exempted, but how much political pressure will the Legislature and one of the state’s top CCUS cheerleaders, term-limited Gov. Mark Gordon, exert on them to comply?

In March, Rocky Mountain Power told the PSC no portfolio standard for CCUS is economically feasible at this time.

Rep. Lloyd Larsen (R-Lander) is sponsoring House Bill 69 -Coal-fired facility closures litigation funding-amendments to allow the state to use $1.2 million appropriated for the Washington coal export lawsuit to fight the closure of coal-fired power plants, and keep CCUS options alive.

What happened to the free market most lawmakers claim to cherish? Why not allow supply and demand to regulate production and labor? Instead, state government is working hard to intervene when industry keeps giving reasons CCUS is a bad idea. 

Black Hills Energy stressed environmental impacts, including carbon capture operations that may negatively affect ambient air quality because they could potentially increase emission of certain pollutants.

Both Wyoming utilities said CCUS equipment could spike water use at coal plants and apply stress on existing aquifers. They’ve also determined the best coal capture technology is a version of an “amine-based solvent,” which can form toxic carcinogens as it breaks down. The White House Council on Environmental Quality warned the chemical’s release “may pose serious hazards to workers and the public near capture facilities.”

Even though the highest-profile CCUS projects in America have been multibillion-dollar failures, many corporations keep trying their luck using readily available federal funds that have been steadily increasing. 

An IRS tax credit program known as 45Q provides a per-ton credit to companies based on how much carbon dioxide they capture. Ten claimed a total of about $1 billion over the past decade. But because the U.S. Treasury Department reported $900 million didn’t meet the EPA’s monitoring and verification guidelines, we still don’t know how much pollution was actually kept out of the atmosphere.

President Joe Biden will be roasted daily by Wyoming legislators for supposedly killing the coal industry. While former President Donald Trump vowed to save coal, it rebounded under Biden, with utilities on track to burn 23% more coal as the global energy crisis lifts demand for fossil fuels.

Biden won’t get any credit for his Infrastructure Investment and Jobs Act, which added $12.5 billion for CCUS, including $3.5 billion in expanded 45Q tax credits. That’s fine by me, because it’s the weakest part of the bill. But it’s hypocritical for Republican lawmakers to decry his record while screaming to get a bigger slice of the CCUS pie.

The hike in severance tax revenues has bailed out our state again, turning a $1.5 billion budget deficit in 2020 into a $1 billion surplus as lawmakers begin work. They will also have a record $2 billion in the “rainy day fund.”

In such fortunate times, legislators never consider raising any taxes, and 2023 won’t be any different. But now is when Wyoming desperately needs to restructure its tax system before our minerals-based economy totally crashes, and quit wasting time and money trying to get commercial CCUS retrofits to work.

Can you picture how many legislators will duck and cover to avoid irate voters who try to wave enormous electric bills in their faces? The price of pushing carbon capture belongs on the Legislature’s back and not the utility executives who tried to warn them.