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Interview with Mike Easley

Mike Easley, CEO of the Powder River Energy Corp, shared his views with JHCGA on the current state of energy in Wyoming and beyond. Mike’s comments are aligned with his role as CEO of Power River Energy Corporation, not any other role for the state of Wyoming.

Tell us about the Powder River Energy Corp. and your background.

PRECorp is the largest electric cooperative in Wyoming. We are a member-owned electric utility, serving northeast Wyoming. The largest concentration of our load is the coal mines, coal-bed methane development, and gas and oil industrial loads. PRECorp has 11,000 member-owners and provides electric service to 28,000 meters in Campbell, Crook, Johnson, Sheridan, and Weston counties.

I’ve been CEO at PRECorp since the year 2000. I came onboard right at the beginning of the coal-bed methane (CBM) boom. Back then, in rough figures, our load was around 180 megawatts and we had about 105 full time employees. Fast forward from that period to around 2009, our load had more than doubled, and we had grown to 160 employees. During the course of the CBM growth, our primary focus was to meet the demand of industrial and commercial consumers who needed electric service. Early in the boom, we also began to consider how to manage risks when a downturn comes - you can’t have a boom without a bust. As a result, we tried to manage our risks on two fronts: the costs to decommission and remove CBM facilities if the CBM boom went bust, and the risks of stranded plant infrastructure investments. We were adamant that the rest of our membership would not be burdened with these costs when the dust settled.

Since the conversation around C02 began, the political extremes have gotten louder and the environment more uncertain. Despite this, PRECorp attempted several times to be proactive and implement carbon mitigation strategies. For example we pioneered an initiative to look at how we could leverage the agricultural industry nationally within the Co-Op footprint to utilize carbon offsets based on agricultural practices. Those efforts were abandoned when the Waxman-Markey [climate bill] bill failed. Since then, the Obama Administration pursued a regulatory approach, rather than a legislative approach. Our approach has evolved into a “wait and see what happens” strategy.

Part 1 - Expert Index Questions: The first section of the Interview Series is a standard set of questions posed to experts in Wyoming and outside. It is part of an ongoing effort which, when there is sufficient input, will result in an energy index. Interviewees indicate if they agree or disagree with the statement.

Section 1 - Wyoming's Energy Future:

The Wyoming coal industry will rebound.

It depends on many factors but I believe there will be a settling point for what the new normal for coal production will be. We are seeing a resetting of cost structures through restructuring and technological advancements that, if successful, will provide a path forward for Wyoming coal.

Wind power should be part of Wyoming’s future.

I agree that wind power has an important role in Wyoming’s future. As a member of Basin Electric Power Cooperative, who is recognized as a leader in wind energy development in the Upper Midwest, PRECorp is currently taking advantage of wind resources in meeting the energy needs of our membership.

Carbon capture and storage (CCS) technologies should be part of Wyoming’s future.

Not only do I believe it should be but I strongly believe with continued attention it will be.The Integrated Test Center (ITC) in Gillette will play a significant role in this aspect of Wyoming’s future.

Wyoming’s economy is overly dependent on energy production.

I agree with that.

Wyoming should try to diversify beyond energy and tourism in the years to come.

I agree with that, and innovation and technology will be two of the essential building blocks to Wyoming’s diversification. Wyoming’s abundance of fossil fuels will continue to play an important role in its economic success but new and more efficient uses of these resources will play a key role in the state’s diversification.

Section 2 - The Nation’s Energy Landscape

Within 5 years in the U.S., CCS technologies will start coming on-line through demonstration projects, bringing the costs of these technologies down, and proving the technology.

Yes, I agree. I think there will not only be CCS but also carbon utilization, which turns C02 into beneficial products.

Within 5 years, California will be using Wyoming generated wind-power.

I hope so. Much work is still needed however, to develop the necessary pathways to deliver wind to the California market.

The national regulations set forth by the Clean Power Plan will be repealed, or abate in some manner, permitting the states to have more autonomy in managing carbon emissions.

The Clean Power Plan gives states the ability to regulate carbon emissions under the Clean Air Act. If states want to be proactive, they will have the autonomy to do so. If states don’t want to be proactive, then the feds will take over. We will have to wait and see what the Supreme Court decides on challenges to the Clean Power Plan.

Other coal producing regions of the U.S. will rebound and successfully diversify their economies beyond coal dependence.

Any economy that is heavily dependent upon coal or other hydrocarbon based fuel is likely to have a very difficult time in replacing the economic impact, regardless of efforts to diversify. I suspect that economies that are very dependent on coal or other hydrocarbon-based fuels are going to experience a new normal for life with increasing concerns about CO2 emissions. If you consider any energy production, whether coal or gas, that activity brings in new money and provides many support services. I don’t think there is really anything that can replace that, one-for-one.

Section 3 - The Global Energy Landscape

Within 5 years, CCS technologies will start coming on-line globally through demonstration projects, bringing the costs of these technologies down and proving the technology.

With the utilization caveat (vs. pure carbon capture), I think there is a stronger likelihood that CCS will take off globally before it will domestically.

Within 5 years, renewable energy will reach price parity with fossil fuel energy, creating a global renewable energy explosion.

I would agree with that, but maybe it will be as far out as 10 years. Distributed resources bring with them challenges in reconfiguring the global infrastructure of central stations, at least in developed countries.

India is the next frontier for CCS technologies.

I don’t think so. I’m no expert on India, but I do think India is going to basically find that the coal plants they install for baseload power are going to be much more efficient and have lower emissions than most power plants.

In the U.S. we focus on central station services for everybody and everything because of reliability and cost factors. In the future, we will see more acceptance of distributed systems. When you take a look at an economy like India, they will probably hopscotch around some of the constraints and approach for building central station service and leverage distributed systems.

The world’s largest economies, the USA and China, should be cooperating with each other in developing and scaling clean energy projects.

I would agree with that. As the top two energy-consuming countries, we have the responsibility to provide the leadership in exploring and developing clean energy projects.

Part 2 - Short Answer Questions:

What steps do you think Wyoming should implement to combat layoffs in the coal industry?

Combat to me means two different things – one is the triage of the people and communities who have been damaged by the recent downturn and related layoffs in the energy industry. I think this is the worst time for Wyoming to be pulling back on programs that help diversify the state’s economy and reliance on coal. I think we should be performing the recommended triage for the folks and our communities that have been affected. Second, we should be doing what we can to keep functional what industry is left, while looking at ways to grow our economy outside of the energy sector.

Should Wyoming work to reemploy such workers in the coal industry or work to create employment for former coal industry workers in other fields, including renewable industries? If so, how could this be done?

The practicality of that is if you take a look at the number of people that are employed and the economic activity between those two fields, they don’t line up one-for-one.

Take the Dry Fork Power Plant as an example. Consider looking at the direct employment of the power plant, the direct employment of the coal mine that serves the power plant, and the supply chain that goes into that system. Then, compare that to what a 350-megawatt wind farm will do for a community from the perspective of construction and lifetime economic impact. They are not even on par.

I think that to the extent that there are wind farms developed in Wyoming, I certainly hope that they provide opportunities for people in Wyoming – construction and opportunities in the supply chain – everything we can do. But we should go into it knowing that these opportunities won’t supplant and replace what we’re losing on the coal side.

In your opinion, can state or federal legislative solutions play a role in solving Wyoming’s current economic situation? If so, what are some of those legislative solutions?

There is a role for state and federal legislation, but I don’t think our problems can be legislated away. We must be cautious as we move to develop new policy so that we do not create unintended consequences. Reducing uncertainty would be an important role for state and federal legislation.

What is a higher priority for Wyoming, developing energy (coal, wind) on Wyoming’s federal land, or protecting it?

The two go hand-in-hand with both critically important to a sustainable Wyoming energy future.

Is there a state that has successfully implemented state legislative policies that Wyoming could replicate?

I don’t think so because Wyoming is a small, energy exporting state. I don’t think we really match up that well against other states. Wyoming has been a leader in creating policy that finds the right balance between development and the environment.

What are currently Wyoming’s most important clean energy R&D priorities? Coal conversion? Carbon capture, utilization, and storage? Hydrogen production and utilization? Energy storage? How should this research be financed?

The School of Energy Resources is looking at carbon utilization. I think what we should be doing is leveraging the activities related to the Carbon X Prize related to the Integrated Test Center, and aligning our research muscle at the university with our economic development muscle to do what we can to turn Wyoming into a center of carbon utilization research and development.

Everybody that is in Wyoming’s coal industry supply and benefit chain should really be looking hard at how we can make Wyoming a center of C02 utilization, not only for the product that we are trying to sell, but also for the energy that we produce in the state.

The financing piece will have to be public-private partnerships. If Wyoming is going to keep its coal industry at some functional level, everyone involved in the supply and benefit chain needs to be looking for ways to make it work better.

Grid modernization is a term that we hear again and again but it is unclear what that looks like. Wyoming could be at the center of grid modernization because of our role as an energy producer. What sort of grid infrastructure can Wyoming invest in to be at the forefront of grid modernization?

I’ve been in the utilities business for 30+ years and I’ve heard grid modernization used the entire time. I really think it goes back to basics; if you don’t have a robust and interconnected transmission system that’s capable of supporting a ubiquitous energy market, you can’t even get started.

Wyoming should do what it can do to be a leader in the west, to be an advocate on public policy, and to create alignment. If you are going to build transmission, everything that goes into building transmission starts from the acquisition up through the construction and ultimate operations; if you are going to make a grid functional, policies must be aligned in that direction. Wyoming is not capable of doing all of this in isolation. We can build the greatest grid possible in Wyoming with robust transmission, but if it only goes to the borders, it is not much good. There needs to be robust interconnectedness across the west that allows for the ubiquitous flow of power and functional markets that transmit power from your producing region to your unique regions, and all of this must be in alignment. For example, Anschutz is still trying to build a line after nearly a decade in permitting, due to a lack of alignment between policy and our stated goal of developing this resource.

What is the international market for coal, oil, or natural gas produced in the U.S.? Should Wyoming be in the business of developing these markets?

I think government should do what government does best, and industry should do what industry does best. I think Wyoming’s role from the governmental perspective is to provide the necessary signals and communication through relationships at the governmental level, so that people understand there is support for these types of developments at the highest level in Wyoming. If government is tipping the scale in one direction or the other and the pressure comes off the scale, the markets fail.Government should be clearing the hurdles and creating the sense of continuity and support, and then let industry proceed.

Wyoming is having an issue now because there have been relationships established, discussions on markets, and willingness at the highest level of government to move our products, whether it is gas or coal. But we also have this balkanization of other states that have the ability to thwart the export of these products.From a government perspective, Wyoming should continue its efforts in working on preventing or figuring out ways to work with other states or entities that can stop Wyoming’s exports.

How much of a global market do you think there is for coal-based industrial chemicals and other end-products of coal conversion?

If we agree that is everybody’s problem, then everybody that has an economy with output is a potential market. The point is that products can be created or enhanced by virtue of whether it is carbon capture, storage, or utilization for enhanced oil recovery, or biofuels, building materials, or any of the things that can be created from flu gas, activated carbon, or any of the direct products of coal. All of those products will compete in the marketplace against products that are manufactured in other ways.The markets are there.It really depends on if you are able to monetize the value of the directly or indirectly, and how it is done.Right now, in enhanced oil recovery, there is a great market for when oil is at a certain amount per barrel.However, if you get oil down to 40 dollars a barrel, all of a sudden enhancement isn’t profitable.

So, I think the markets are there, but there is a lot more market uncertainty about the market inputs than people realize, and that is the reason some of these things aren’t moving forward as fast as we would like.

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