JHCGA's Perspective on the Wyoming Energy Landscape
In July 2016, JHCGA ran a simple twitter poll asking, “Will the Wyoming Coal Industry Rebound”. Of the 127 votes, only 39% responded yes.
If the respondents to this poll are to be trusted, Wyoming’s coal industry may not be coming back. This would be horrible news for Wyoming’s current economy because Wyoming is the nation’s largest producer of coal, by far. As a result, the decline of the coal industry has precipitated serious economic woes in Wyoming.
Several factors have challenged the coal industry in Wyoming: the increasing use of natural gas, new carbon emissions fighting regulations, renewable portfolio standards, and a dwindling global export market, impacted by trends such as diminishing coal consumption in China.
The decline of the coal industry presents significant challenges to Wyoming, the U.S.’s #1 producer. Nearly 40% of the U.S.’s coal comes from Wyoming and fossil fuel revenues, led by coal, generate 70% of the state’s revenue. The coal industry is also Wyoming’s main employer - approximately 7,000 workers prior to recent layoffs. These are good paying jobs – Wyoming coal miners take home an average of $82,000/year before benefits. Furthermore, coal revenues play a major role in funding education and infrastructure across the state.
Recognizing the challenge facing the state, Wyoming’s Governor Matt Mead has already been investigating new pathways forward, both from an energy perspective and also how to best stimulate local economies. Because of Wyoming’s role as an energy producing state, the state has an opportunity to play a leadership role in applied R&D and/or pilot test energy related technologies “to take them to maturity and reach the ‘market tipping point’ where investments will unlock larger potential." The state is trying to crowd in innovation to reinvent carbon - through the state’s Integrated Test Center, and explorations to build an industrial park powered by CCUS energy for large scale economic diversification (transportation, power grid, sewage, etc) projects.
Wyoming also has the nation’s highest quality wind in terms of wind speed and number of hours per year. Wind power could be a major future industry for the state – providing jobs and much needed public revenues. Geographically, Wyoming is ideally located to provide wind energy to California, New Mexico, and other western markets to meet demand growth as both state and national renewable portfolio standards continue to increases. As a result, major wind development projects have been underway for several years. However, Wyoming wind projects also face hurdles. Wyoming is the only state in the nation that imposes a tax on wind.
As a leading bipartisan policy center based in Wyoming, JHCGA is well positioned to outline forward-looking, yet practical, pathways for leaders and workers in Wyoming. JHCGA’s new initiative “Transition Strategies for Carbon-Intensive Economies” seeks to create new coalitions, consensus and actions that will help contribute to a new economic future for the state – for example joint international CCUS projects, energy efficiency investments, energy infrastructure investments, and more wind and solar jobs.
JHCGA has identified three central concepts which the state should consider in policy planning:
Wind is not the enemy of coal. As outlined in Rob Godby’s research from the University of Wyoming, the National Clean Power Plan provides a choice between a mass-based vs. rate-based system of compliance and by choosing a rate-based system of compliance, Wyoming could opt for adding wind power generation (to the denominator) with no additional pounds of carbon dioxide emissions (in the numerator), thereby potentially bringing the rate of emissions down to the required rate of 1,300 lbs/kwh by 2030 without having to retire any existing coal-fired power plants. If, by contrast, Wyoming opts for a mass based system, the only way to bring its total carbon emissions into compliance would be to substitute natural gas for coal. The rate-based system of compliance lets coal and wind work together, rather than compete.
Re-examine the wind tax. Currently, Wyoming is the only state in the nation that levies a tax on wind power. There is discussion of further increasing the wind tax – which wind developers fear would jeopardize the financial viability of wind projects. The result of this uncertainty is that Wyoming’s wind projects – which have the potential to generate new employment and new revenues for the state, are on hold. JHCGA believes that there should be a state-wide conversation between the state legislature, the coal-industry, and the wind developers that aims to hire laid-off coal workers in wind industry jobs in exchange for the legislature abandoning the state’s wind tax, in a jobs-for-taxes swap.
Partner with China. Large amounts of capital will be required to launch the next generation of energy projects in Wyoming. The willingness to invest the scale of capital needed will most likely come if the state of Wyoming can partner with China in joint investments. Chinese FDI could play a significant role in launching CCUS projects and investing in wind manufacturing facilities in Wyoming.