The Future of Coal in Utah
CRITICAL ISSUES & FUTURE SCENARIOS The following scenarios illustrate four plausible paths to the future of Utah’s coal industry. Each scenario incorporates the direction that the key uncertainties could follow in order for a specific scenarios to be realized. It is vital for the reader to recognize that it is unlikely that any of these scenarios will play-out exactly how they are written here. Instead, they should be used as a framework to explore multiple futures. From these scenarios, government and business leaders can not only explore their understanding and estimation of what path the coal industry is likely to take, but they will be able to see the rationale for alternatives of action in a new light. Developing a flexible, strategic response to each of these scenarios—regardless what events lead to them—will provide Utah’s coal producing communities the best opportunity for success in the face of any future.
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UTAH • With demand for coal-fired power diminishing in California, the Los Angeles Division of Water and Power (LADWP)—IPP’s primary customer—will not be renewing its power purchase agreement, which is set to expire in 2027. Instead, the LADWP is working with IPP and intends to build a new natural gas plant and begin purchasing natural gas-fired electricity from IPP by 2025. • The Carbon Plant, operated by Rocky Mountain Power, is set to close its doors in 2015 due to the prohibitive costs of operating under existing federal regulations. • The Bonanza Plant was recently fined for excess pollution and faces uncertainty due to an increasingly stringent regulatory environment. • Rocky Mountain Power (RMP) is not planning to build additional coal-fired generating capacity in Utah. Instead, over the next ten years, RMP intends to reduce their reliance on coal by 15 percent. • Natural gas production in Utah, occurring primarily in the Uintah Basin, exceeded coal production for the first time in 2010, with that trend continuing over the past four years. Increased competition, in the form of decreasing natural gas prices, puts additional pressure on the coal industry. • Earlier this year, the Ute Indian Tribe announced plans for a 1,000-megawatt natural gas power plant, demonstrating increasing competition for Utah’s coal-fired power plants. UNITED STATES • Over half (8,433) of all coal miners in Eastern Kentucky have been laid off since the first quarter of 2009. • While public opinion tends to shift over time, Gallup’s most recent energy poll reports that two thirds of Americans favor development of alternatives to coal. • The United States is experiencing a shift away from coal-fired power. The state of Nevada, for example, reduced its coal-fired power production from 70 percent of its total power generation in 1992 to 12 percent in 2012. • Since 2010, over 150 of the nation’s coal-fired power plants have closed or been scheduled for retirement. • The EIA reports 11 planned coal-fired generating unit additions in the United States in comparison with 281 natural gas-fired generating unit additions, with coal accounting for 4 percent of planned capacity and natural gas accounting for 45 percent of planned capacity. • The EPA estimates that 46 to 50 gigawatts of coal-fired generating capacity—over four times PacifiCorp’s total generating portfolio—will go offline as a result of its proposed CO2 regulation. As a result, the EPA also estimates that thermal coal production in the United States will decline by roughly 26 percent. WORLD • The world produced an oversupply of coal amounting to roughly 840 million short tons during the 5-year period between 2008 and 2012, a trend many experts expect to continue. • Global coal prices dropped roughly 40 percent between 2011 and 2014, decreasing the profit margins of US coal exporters. • With China, Japan, and South Korea importing half of the world’s coal exports, Indonesia and Australia (who ship half of the world’s coal exports) have a distinct geographic advantage in the global coal market, contributing to their ability to sell coal at low rates.
This scenario explores the future of coal as an indispensable power source for the US; with Utah as a regional producer of both coal and coal-fired power. It first explores how key uncertainties must play-out for coal to thrive in Utah as the de facto energy source for the state and country; then it explores the socio-economic impact this scenario would have on the Utah Coal Belt. ASSUMPTIONS Public Opinion: shifts toward a greater perceived threat (i.e. water scarcity) Govt Regulation: decreases, or remains at current levels Technology: for alternatives evolves according to historical patterns, while emissions tech improves Market Forces: the market considers coal to be the lowest-risk, highest-return source Catastrophic Events: a major event affects natural gas infrastructure, but not coal IMPLICATIONS Central Utah has benefited greatly from its continued involvement in the coal industry. USU-East has become a top research institution in clean coal technology. Communities in the region have expanded, mines have reopened, and jobs in multiple fields are abundant. Mechanic shops are busy working on mine and transport equipment, and several towns have had mid- to large-sized retailers building on their main streets. Since other fuel costs continued to increase, several manufacturing companies have demonstrated interest in being located where energy prices are comparatively low.
In this future, Carbon capture and storage (CCS), in addition to other clean coal technologies, have been implemented at low costs. These technological advancements have enabled plants to keep up with EPA regulations and will enable coal plants to meet federal and state regulations in the future. Because emissions technologies have surpassed regulations, older coal plants will continue to operate and new plants are brought online to match increased domestic demand. These improvements in technology have essentially ended the negative trend in public opinion of coal power plants. Utah’s power generating facilities and coal mines are producing more than they have since the mid-1990’s. The likelihood of the nation demanding a move away from coal is unlikely. Demand for base-load power remains strong because battery storage capacity is incapable of keeping up with home energy needs, and micro-grids have not developed quickly. Fear of nuclear accidents, resulting from terrorist attacks or malfunctions, keeps significant nuclear power from developing. Renewables have continued to increase in capacity, but they are still far from being consistent enough to achieve base-load capacity, leaving coal as the de facto energy source in the US. Utah’s coal is being used by facilities in Utah and other states—maintaining strong domestic demand. Population growth and the continued development of undeveloped nations is increasing energy demands across the globe, keeping prices at a premium, and the international market healthy. Finally, the coal industry has a strong lobby in state and federal legislatures—politicians want to burn coal because it is inexpensive, creates jobs, and secures state and national economics. Coal’s low price and technological advancements in emissions reductions have secured favorable opinion into the future.
This scenario explores the future of coal if it continues to be used at or near current rates. It explores how key uncertainties would likely play out in a scenario where coal maintained its current level of utilization, and long term coal use trends continue. ASSUMPTIONS Public Opinion: maintains current trends Govt Regulation: fluctuates at (current) levels that discourage new development in coal Technology: renewable technology improves at the same rate as emissions solutions Market Forces: maintain current trends Catastrophic Events: a major event affects natural gas infrastructure, but not coal IMPLICATIONS The continued decay of the industry leaves Utah’s Coal Belt in a holding pattern of slow decline. Young people continue to move out of the area, leaving behind an aging population that generates little tax revenue for the counties. Emery County has maintained some of the revenue thanks to the construction of two oil refineries, but it has not solved their population’s aging problem. There are few new businesses, few new jobs, and while Utah’s Coal Belt stays relatively unchanged for 10 to 12 years, it is apparent that there are few prospects for growth. The decline will be slow and painful, spanning upwards of 40-60 years, but the industry continues to decline with little hope for redemption.
In this future, public opinion continues to fluctuate. While the trend is downward over time, it is slow and gradual. Intensely polarized politics in Washington have slowed EPA’s passage of new regulations as Congress debates the level of involvement and oversight the government should maintain over the mining and power industries. At the same time, there is a serious lack of viable alternatives to coal energy. National opinion of natural gas production through fracking has continued to deteriorate, and national opinion of nuclear power has remained negative. Environmentalist groups have started pushing a “renewables only” campaign, yet technological and production capacity barriers have largely neutralized its success—renewable technologies have simply developed too slowly. Despite relatively slow improvements, the amount of money invested in these technologies has not diminished as environmental groups and lawmakers seek the lowest possible emission energy source, however the technology still cannot meet needs and there is no certain technological breakthrough on the horizon. New, inexpensive emissions reduction technologies have enabled many older coal burning facilities to remain open despite the increased emissions regulations from the EPA. Additionally, new EPA regulations are taking into account the need for coal-fired power, slowing the pace and lessening the impact of the regulations in the short-term. Despite efficiency efforts, continued growth in demand has not enabled renewables to keep pace with energy requirements without replacement of older carbon fuel facilities being replaced with new carbon fuel facilities. Generally, coal facilities are replaced with natural gas plants, but coal plants are occasionally built. This trend, combined with the slow but consistent increase in renewable energy sources is leading to a slow decline in coal as a percentage of the nation’s energy mix. In the long run, it appears that coal will serve as a support for supplying a smaller and smaller share of the national energy mix. This trend keeps coal alive and relevant in coming decades, however coal mines and coal-fired power production facilities are slowly taken off-line. Utah’s coal mines slowly decrease across the board, or several shut-down with one or two taking up the slack. This leads to declined employment in both the mining and mine service sectors. Similarly, Utah’s coal-fired fleet are taken off-line when their intended lifespan is up (2040’s); they are replaced by natural gas plants or renewables.
This scenario explores the type of events that would need to occur in order for ‘coalpocalypse’ to happen in the Utah Coal Belt. The assumption is that Utah coal essentially remains in the ground. ASSUMPTIONS Public Opinion: substantially shift away from support of coal Govt Regulation: consistent and overwhelming increase of regulation Technology: renewable technology is incentivized heavily Market Forces: coal markets collapse as alternatives increase their feasibility Catastrophic Events: events don't directly affect coal infrastructure, but the public blames them on coal IMPLICATIONS This is a devastating blow to Utah’s coal industry. As mines and power plants close, the population shrinks and ages, leaving communities with little tax revenue to provide necessary services. Main streets become ghost towns as businesses dry-up. While new job sources are prevalent elsewhere in the country as a result of prolonged economic prosperity, Utah’s coal counties experience an economic bust. Consequently, few businesses or manufacturers are interested in the region. The few youth still growing up in these communities seek employment elsewhere as they graduate from high school and attend college.
In this future, public opinion of coal and CO2 emissions continued to fall. Air quality and climate change/global warming became household concerns for citizens. Natural disasters are perceived as resulting from climate change, which in turn, is perceived as being caused by air pollutants. Similarly, the national economy consistently improved. Most citizens are willing to pay a higher energy bill each month with the assurance that their energy is ‘green’. Across the US, citizens associate dirty air and extreme weather with coal emissions, and they demand action from politicians. This strong negativity in public opinion brings both sides of the political aisle together to regulate emissions. The EPA, states, and Congress pass increasingly stringent emission regulations that are not economically feasible for energy companies to keep pace with, especially since alternative energy sources, notably natural gas, develop the capacity to sufficiently power the US at reasonable prices. In this scenario, natural gas and nuclear energy are considered more environmentally friendly than mining and burning coal despite storage problems for nuclear waste. Additionally, solar, wind, and geothermal energy technology improved their efficiency and cost effectiveness. Because they were also supported with governmental subsidies, renewable energy sources began to compete with natural gas. As a result, all fossil fuels became significantly less important to the national energy portfolio. These changes fundamentally crippled the steam coal market in the US, and mining companies across the country began looking for foreign buyers, flooding the international market with coal and reducing the price substantially. These low prices have made it no longer economically feasible to mine coal in Utah, as mines in foreign countries sold coal at a rock bottom rate, a rate that only a few mines in the US could afford to produce at.
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This scenario attempts to illustrate the conditions necessary for the industry to regain viability after a substantial and fundamental decline. This scenario follows the pattern recently seen in Germany. ASSUMPTIONS Public Opinion: shifts completely away from environmental concerns Govt Regulation: regulations are lifted after an extensive period of constraint Technology: research and development investments are diverted to other sectors of the economy Market Forces: demand for coal increases as demand for alternatives stagnates Catastrophic Events: a global-scale crisis fundamentally shifts the economy IMPLICATIONS This scenario provides temporary success for the coal industry in Utah. Power plants, mines, and supporting industries success have caused economic prosperity with high paying jobs for the majority of residents. This, however, will only last as long as the war and economic recovery afterwards. The coal mines are likely to continue operation, but in the long-run, power plants will shut down and large numbers of citizens will leave nearby communities. The economic decay the region faced in the 2010’s will return in the near future if additional job sources are not created for citizens outside the mining, power production, and support industries that resurged.
In this future, coal in Utah experienced a significant decline, yet market forces create resurgence in coal use. A protracted world-war has erupted, driving the US to seek cheap, reliable energy sources as they try to maintain their economy. The natural gas plants that replaced coal plants lack storage capacity to continue operations and became easy targets for combatants. This caused the country to turn back to coal, and compelled the President to issue an Executive Order suspending emissions regulations for the duration of the war. Coal plants are re-opened and jobs in central Utah are abundant. People move into communities to take jobs, and new industrial operations are being established in the region to take advantage of the cheap energy, existing vacant structures, and proximity to rail to supply the US war effort. The war became a standoff. Utah’s coal economy benefited from the sustained demand. However, gradually, politicians on either side of the aisle voiced their appreciation of the coal industry, but also stated their intentions of once again eliminating the industry after the war is over. Public attention was completely occupied by the war. Citizens appreciated the economic benefits of coal more than they feared the use of it. Many believe and hope that coal will continue as the economy tries to get back on its feet after the conclusion of the war. Coal plants across the country experienced the same success, and economists believe that at the war’s conclusion, other countries will be eager to purchase coal the world over as they seek inexpensive power to kick-start their economies. This caused global coal prices to remain high enough to make mass exports of Utah coal economically feasible for the foreseeable future.