Wyoming may see 8 years without major coal lease sale

The last federal coal tract sold in Wyoming was in 2012, and the next sale of a major coal tract might not occur until 2020, due to the Department of the Interior’s indefinite moratorium on the federal coal leasing program.

Although Wyoming mines have many years’ worth of coal under lease, some worry that delaying the lease process, which already takes up to seven years, may complicate operations.

Gillette-based Cloud Peak Energy, for example, submitted its West Antelope III lease by application (LBA) in August of 2015. It doesn’t expect to begin mining on the lease until 2026. That 10-year schedule represents the company’s best guess of how long the application and mine planning process might take, and that was before the federal coal leasing moratorium announced last month, said Brad Clark, of Cloud Peak Energy.

The company’s Antelope mine has enough federal coal under lease to continue mining until 2026, he said. But putting a 3-year pause on processing the company’s new 441 million ton LBA might delay mining into the new lease area even longer. Clark said the mine may have to ramp down its annual production of 33 million tons before 2026 if it doesn’t have assurances the new lease might be analyzed and approved.

Based largely on this concern, the Powder River Basin Regional Coal Team last week voted unanimously to recommend that the Bureau of Land Management continue to process Cloud Peak’s West Antelope III LBA, along with the Decker South Extension LBA in Montana submitted by Lighthouse Resources Inc.

“We all recognize the pause,” said Bridgett Hill, director of Wyoming State Lands and Investments and a coal team board member. “But I think we continue to process [the LBAs] so that when the pause is over we’re ready to go.”

Others opposed adding the Antelope and Decker LBAs to the list of applications under review. Jeremy Nichols of WildEarth Guardians said it wouldn’t be wise to shift the attention of Interior personnel from the programmatic environmental impact statement and reformation effort to process more coal leases.

“The American public interest needs to be protected here, and it is not best served on spending resources on these leases,” Nichols said. “We have companies going bankrupt. They clearly are not in the position to see through leases.”

Secretary of the Interior Sally Jewell issued Order 3338 on Jan. 15. It places a “pause” on federal coal leasing while the department conducts a review of the program, from whether the public receives a fair return on the publicly owned resource, to the climate impacts of mining and burning federal coal. The pause will remain in effect during the review — an estimated three years — and won’t be lifted until potential reforms of the leasing program are implemented.

Stockpile

It’s unclear how many years of production each of Wyoming’s 18 active coal mines has under lease. The Bureau of Land Management doesn’t track such information. But the volume of “permitted” coal under lease in Wyoming is large, due to the fact that the state had shipped coal at a rate of more than 400 million tons per year for several years, and still supplies about 40 percent of the nation’s coal.

In 2005 alone, feds approved more than 1.7 billion tons of coal to be mined in the Wyoming portion of the Powder River Basin, and three years later statewide production hit an all-time annual high of 446 million tons. Since 2008, the feds have approved another 2.65 billion tons, according to BLM data. But weakening markets have kept production on a downward trajectory of about 17 percent since 2012.

At least two pending lease applications were withdrawn at the request of mining companies themselves, because of poor market conditions and huge amounts of debt. The West Jacobs Ranch tract containing 957 million tons sought by an applicant affiliated with Arch Coal, and the Antelope Ridge tract containing 1 billion tons sought by an applicant affiliated with Peabody Energy, were both withdrawn in November.

Federal officials estimate mines have on average 20 years of reserves from existing federal leases, “Thus, there should be no impacts to jobs or coal production from the pause,” a Bureau of Land Management fact sheet states.

Secretary Jewell’s moratorium and the “programmatic” review of federal coal leasing includes several exemptions for LBAs already under review (including three in Wyoming’s Powder River Basin), as well as allowances for lease modifications and emergency leases to maintain existing mining operations.

Coal outlook

The prognosis for Wyoming coal continues to deteriorate, and with it so does coal’s contribution to the state economy.

Yet even in the face of weak markets, bankruptcies and tighter regulatory controls, the woes of Wyoming coal — at least for now — still don’t factor as heavily on the state economy as the downturn in oil and natural gas, according to a University of Wyoming economist.

State revenues from coal, oil and natural gas are all expected to decline over the next five years. However, “coal is still the best forecast of the bunch,” UW’s Robert Godby recently told a Bureau of Land Management coal lease advisory council.

Just how much declining coal weighs on Wyoming’s revenue forecast is still being calculated. An update of the “The Impact of the Coal Economy on Wyoming” report, first published in February 2015, is in the works and will be released sometime in April, said Godby, lead author of the report.

Wyoming’s overall “coal economy” makes up 11 percent of Wyoming’s gross state product, according to the UW study. Coal mining contributes $1.3 billion annually, or 11.2 percent of all government revenues collected in the state.

The report last year indicated Wyoming’s revenue from coal could fall anywhere from 31.9 percent on the low estimate to as much as 63.1 percent by 2030, depending on how the Obama administration’s Clean Power Plan is implemented. Much has happened in the world of coal since the report, Godby said. The Clean Power Plan was rolled out, and two Powder River Basin coal producers have declared bankruptcy, and a third is on the verge of bankruptcy. The general tone of the forecast still holds, Godby said, and the future of Wyoming’s coal economy still depends on how other states respond to new carbon emission regulations.

“It really doesn’t matter what Wyoming does in response to the Clean Power Plan, it’s what everybody else decides to do with our coal,” Godby told the Powder River Basin Regional Coal Team last week in Casper. Godby said that while the coal market continues to decline, the economics of solar and wind power continue to become more competitive with coal.

As coal production continues to slide, so does coal productivity. The cost of mining vs. revenue in the Powder River Basin has dropped 25 percent because crews must chase coal seams deeper.

One in 10 jobs in northeast Wyoming — the nation’s largest coal-producing region — could be lost by 2030, the study said. Coal mining accounts for 5.8 percent of state’s total employment, and there was less than a 2 percent decline in mine workers in Wyoming from 2014 to 2015.

— This BLM map depicts coal lease tracts and mining operations in the Powder River Basin: