A new study quantifying the direct and indirect benefits realized by Wyoming from the coal industry was released March 19 by the Wyoming Infrastructure Authority (WIA).
The study addresses the possible economic impacts of federal regulations on coal at every level of the Wyoming economy—jobs, gross state product and state revenues. The study, conducted by the University of Wyoming (UW) was commissioned by the WIA. This is the first effort in over 20 years to assess economic impacts to the degree achieved by the authors of this study, WIA said.
Wyoming, keyed by the highly-productive Powder River Basin, is by far the largest coal producing state in the U.S, far out-distancing second place West Virginia. Top coal producers in the state include Peabody Energy (NYSE: BTU), Arch Coal (NYSE: ACI) and Cloud Peak Energy (NYSE: CLD).
Under a variety of environmental regulation scenarios, coal production declines from 20-45%, nearly one in ten jobs are lost in the Powder River Basin (PRB) and state tax revenues decline by up to 36%-46% from 2012 to 2030.
Loyd Drain, Executive Director of the authority, said that “there has never been a more critical time to invest in value added technology advancement, regional partnerships, and development of new foreign markets to enhance Wyoming’s coal economy. Absent meaningful investment in one or more of these areas, Wyoming coal production is looking at significant possible declines by 2030. The State of Wyoming is on-point with its planned Integrated Test Center and the Value Added Energy Industrial Park concept. Those two initiatives together with a robust export policy will aid in paving the way to the future for Wyoming coal.”
“Participating in new foreign markets for Wyoming Coal has the potential to offset a significant portion of the projected domestic demand decline resulting from a growing amount of federal regulations,” said Bob Watters, Senior Vice President of SSA Marine. “For example, a 100 million ton export market would generate $1.2 billion in gross state product, preserve and/or generate more than 4,000 new jobs and over $345 million in labor income alone—those benefits would be primarily centered in and around the PRB.”
The study highlights a number of potential scenarios which would affect Wyoming’s coal-centric economy. The most adverse outcomes occur in the scenarios under the U.S. Environmental Protection Agency’s proposed Clean Power Plan (CPP), which would cut CO2 emissions from existing power plants by 30% by 2030. But the scenarios, which allow for regional cooperation and energy efficiency development, are better for Wyoming than others. This analysis, coupled with Wyoming’s role as an energy exporter, underscores the importance of Wyoming working with other states to develop a regional solution to the CPP, the authority said.
The study also identifies other challenges faced by policymakers. In some cases, scenarios which are best for job preservation and coal output levels are not best for state revenues. The reverse is also true. This highlights the importance of policymakers’ decisions to prioritize desired outcomes as some actions will help accomplish those goals more than others.
Said the report about CPP impacts: “This analysis indicates that despite the 111(d) rules stimulating Wyoming’s natural gas sector, employment losses in the state’s coal industry are not offset by the additional natural gas production prompted by carbon regulation. The negative impact to employment in Wyoming from reduced coal production is approximately two to four times larger than the positive employment effects from natural gas production. Across all scenarios analyzed, the total impact on statewide employment ranges from a 0.3% decline in 2016 to a 3.2% decline in 2030, relative to 2012 employment levels. The impact of the regulations would be expected to lead to a contraction in statewide economic activity and employment regardless of any other offsetting economic growth in Wyoming.”