Wyoming and Montana filed a federal lawsuit yesterday that seeks to overturn the Bureau of Land Management’s decision to end coal-mining leases in the Powder River Basin, which is the main source of coal hauled by BNSF Railway and Union Pacific.
BLM issued its final decision on coal leases last month. The move came after a federal court ordered the agency to re-evaluate its environmental review criteria to include both limited leasing and no coal leasing options.
“Instead of working with the states to address their concerns, BLM pushed through their narrow-minded agenda to stop using coal, ignoring the multiple-use mandate and the economic impacts of this decision, including skyrocketing electricity bills for consumers,” Wyoming Gov. Mark Gordon said in a statement announcing the lawsuit. “They did not do their job properly.”
Existing coal leases in the Powder River Basin include enough coal reserves to keep production going through 2041, the agency said.
The incoming Trump administration is expected to reverse the BLM decision as part of its support of the fossil fuel industry.
The last coal lease was granted in 2012, four years after Powder River Basin coal production peaked at 496 million tons. Wyoming mines, which unearth the lion’s share of PRB coal, are on track to produce 190 million tons this year, down from a peak of 466 million tons in 2008.
The State of Wyoming projects that by 2030 coal production will fall to 130 million tons due to the ongoing retirement of coal-fired power plants and increased competition from cheap natural gas and renewable sources of electricity generation.
The declining demand for PRB coal makes the BLM decision – and the lawsuit seeking to overturn it – academic.
“There’s more than enough coal right now, given the leases,” says Rob Godby, an associate professor of economics at the University of Wyoming. “The real problem the coal companies have is not having enough coal – it’s not having enough customers.”
In the next two to three years, Wyoming coal production could sink to 160 million tons based on the announced retirement dates of coal-fired power plants, Godby says.
The main forces working against PRB coal are not regulatory or environmental – they’re economic, Godby says.
Coal-fired power plants are “just not economic to run when you’ve got natural gas so cheap in the market and you’ve got so much renewable energy. Coal is just the last choice,” Godby says. “That’s before you get to environmental issues surrounding it and the need to maybe reduce it due to climate change goals. So the downward trajectory obviously is going to continue.”
Aging coal plants will require expensive upgrades in the next few years, which has spurred a wave of planned power plant retirements. “Most power plants in the country are hitting 40 or 50 years of age, which means that those power plants are going to require significant reinvestment to maintain them. And when utilities get to that point, that’s why they’re retiring them,” Godby says.
Even coal-fired power plants with years of life left are running less frequently and tend to be sources of power only at times of peak demand in the summer heat or cold of winter. So that further reduces demand for coal, Godby says.
Meanwhile, struggling coal producers are likely to close and consolidate mines in the coming years amid dwindling demand, Godby says.
Godby likens investing in improvements in a coal-fired power plant or at a coal mine to making major repairs to a beater car with too many miles on its odometer. “You don’t put a new transmission in a car you’re going to get rid of,” he says.
For the year to date, BNSF’s coal volume is down 19%. UP’s has dropped 22%.
Last week, BNSF originated an average of 25.1 coal trains per day out of the PRB, down from 28.6 a year ago, according to Surface Transportation Board data.
UP operated an average of 10.1 loaded coal trains per day out of the Southern Powder River Basin last week, down from 12.7 a year ago, the STB data shows.
