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December 16, 2017

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Why the West is moving away from coal (even with Trump in office)

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Julie Jacobson / AP

This May 14, 2012, file photo shows the Reid Gardner Generating Station near a farm on the Moapa Indian Reservation in Moapa.

Southern Nevada’s last coal plant closed March 16. That same day, a New Mexico power company said a plant on Navajo land might be next to shutter. And in a somewhat unexpected decision the month before, regional utilities announced the early shutdown of the West’s largest coal plant, also on the Navajo Nation. President Donald Trump might have pledged to invigorate the industry, but most economists agree on one trend: Western coal is unraveling.

The outlook was different in 2010, when the Sierra Club launched its Beyond Coal campaign. It deployed lawyers, mobilized supporters and lobbied state legislatures to shut down coal-fired power plants across the U.S. in an effort to curb carbon emissions. Then something changed. The argument against coal expanded from one about the environmental costs to one that cited economics.

“The economics of power generation don’t support replacing coal-fired generation,” said Robert Godby, who directs the Center for Energy Economics and Public Policy at the University of Wyoming.

That’s a primary reason why utilities across the West are retiring old coal plants instead of building new facilities or investing in modern infrastructure. Power companies have trimmed the region’s coal supply by about 11 percent since 2010, according to the Sierra Club, which expects that number to more than triple by 2030.

The cheaper fossil fuel

President Trump has repeatedly pledged to revive the coal industry by rolling back environmental regulations enacted under the Obama administration. Economists argue that while regulations play a role, competitive fuel alternatives are the primary constraint.

“The major problem for coal is not regulation. It’s natural gas and secondarily renewables,” Godby said.

Many Western coal plants were constructed in the 1970s to provide cheap power. Natural gas prices, in an oversupplied market, have remained low in recent years, cutting into coal’s market share. Many grid planners see natural gas as the cheaper option, and to a lesser extent, the same is true of renewables. Solar plants and wind farms are coming down in price. Although these projects require a high up-front investment, they are attractive because the cost of fuel — the sunshine or the breeze — is free.

This was the rationale behind shuttering the Navajo Generating Station when its lease ends in 2019. As the West’s largest coal plant, it had long been a target for environmentalists. But in explaining their decision, its owners — Arizona utilities, NV Energy and the Bureau of Reclamation — cited low natural gas prices.

“Trump has made a lot of promises to a lot of people. The promises on coal are not based on any rational look at what’s going on in the electricity sector,” said Bill Corcoran, Beyond Coal’s regional director for the 11 contiguous states that comprise the Western grid. “This is a matter of economics and not ideology.”

Energy markets are changing

Federal regulations might not be squeezing Western coal, but state regulations can strongly affect its future.

“California is the elephant in the room,” Godby said.

When California removed coal from its portfolio, it narrowed the market for selling energy from coal plants in the region. The same was true in Nevada, when NV Energy agreed to phase out coal plants like the Reid Gardner Generating Station.

Such state regulations have a trickle-down effect, accelerating the closures of plants in Arizona and Nevada, as they are saddled with the same costs but a much smaller customer base.

And while pollution laws might not be the primary driver of coal plant closures, they can have a big effect on the margins, making a barely profitable operation unprofitable. “We have focused a lot of our energy and time on requiring coal plants to account for their own pollution,” Corcoran said.

Specifics vary across the West. In Oregon, the legislature passed a bill requiring the state to remove coal from its portfolio by 2035, under an agreement between environmentalists and state utility PacifiCorp (owned by NV Energy’s parent company, Berkshire Hathaway Energy). Sometimes the push comes from multiple forces. In December, Nevada regulators asked NV Energy to do a new cost analysis on its last coal plant in Northern Nevada, amid pressure from the Sierra Club for an earlier closure.

Another factor complicating these calculations is increased momentum to regionalize the Western grid and share more electricity across state lines. Such a move, which is supported by PacifiCorp, would allow states to balance surplus solar. That would make it even more difficult for inflexible coal-fired generators to compete, Godby said. Some groups, like the Sierra Club, are wary about regionalization because coal-reliant utilities like PacifiCorp could pollute cleaner markets.

Local economies take a hard hit

The coal industry is on the decline, but it is far from dead. According to monthly data from the U.S. Energy Information Administration, Utah, Wyoming, Montana, Colorado and Arizona got a plurality of their energy from coal in December 2016. Yet local economies often feel the decline in more immediate ways.

Montana state Sen. Duane Ankney knows this well. He lives in Colstrip, a town with a population of about 2,000 situated 130 miles east of Billings and about 35 miles off the interstate. There is just the Colstrip Generating Station and a coal mine. “There is no pass-through traffic,” said Ankney, who represents the town and worked in the mine for 30 years.

Owners of the Colstrip plant — one of the largest coal operations in the region — plan to shed two units, as part of a court settlement last year over alleged Clean Air Act violations. Last year, Ankney joined a group of several lawmakers pushing bills to mitigate the effects on the local economy. The Legislature is now considering propping up the plant’s operations to keep it open for five more years.

Ankney said the closures would come with job losses, less school funding and falling real estate prices.

“That is the economy,” he said. “And the economy of the town up to this point has been very good.”

The losses expected in Colstrip — about 130 jobs, Ankney estimates — stand in stark relief to the economic upheaval facing the Navajo community in Northern Arizona. The Navajo Generating Station and a nearby mine, which also will be forced to close in 2019, employ nearly 1,000 people, and the tribe’s budget is heavily dependent on royalties from the two coal operations. They are integral to the local economy, and few credits are available to ease the effect of the closures.

If that utility in New Mexico does close a second coal-fired plant on Navajo land in 2022, it would be another blow to local jobs and the regional tax base.

“We understand we are in challenging times where natural gas is affecting the numbers and ongoing operations for all coal-powered power plants,” Navajo Nation President Russell Begaye wrote in a news release this month. “The four corners region will be severely affected by the closure.”

Begaye wants the Trump administration to keep the coal plants open.

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