Larry Wolfe shared his views with JHCGA on the current state of energy in Wyoming and beyond. Mr. Wolfe's views are his own.
Tell us about and your background vis a vis energy in Wyoming.
I have practiced natural resources and energy law in Wyoming since 1980. I worked at the Wyoming Attorney General’s Office from 1980 – 1985 where I represented the Wyoming State Engineer on all water issues, including serving as Wyoming’s lawyer on several interstate water commissions (Yellowstone River Compact; Upper Colorado River Compact; Colorado River Compact). From 1983 – 1985 I served as the Senior Assistant Attorney General in charge of the natural resources division, which represented all the natural resources, environmental, energy and utility agencies. In 1985 I joined Holland & Hart’s Cheyenne office, where I continue to have an office as a retired partner. I represented coal, trona, oil, gas, uranium, bentonite clients as well as energy project developers, utilities, and in the last decade wind and transmission developers. I have a specialty in Wyoming’s mineral tax system, where I have litigated many of the important tax issues pertaining to Wyoming’s main source of tax revenue. I was the Chairman of Holland & Hart’s firm wide Natural Resources and Energy practice which included more than 60 lawyers in 15 offices around the West (now more than 100 lawyers). For two years, 2007 and 2008 I was the Managing Partner of Holland & Hart (which now has about 550 lawyers). I taught energy and environmental law at the University of Wyoming Haub School of Environment and Natural Resources in the Fall 2015 (upper division and grad students) and I am part of a team teaching a class on natural resources problem solving to graduate students this Fall (2016).
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 strongly agree, agree, are neutral, disagree, or strongly disagree with the statement.
The Wyoming coal industry will rebound.
Wyoming’s coal industry produced at its peak in 2008 more than 460 million tons of coal. In 2015 Wyoming produced 373 million tons. In 2016 Wyoming will be lucky if it produces 300 million tons. If Wyoming can maintain 300 million tons in 2017 we should consider ourselves fortunate. Coal plants are being retired at a rapid rate and no new plants are being built. Low natural gas prices will continue to displace coal plants and thus coal production. Wyoming will continue to have a coal industry, it will just be significantly smaller and employ fewer workers (in part because of automation) and generate less tax and royalty revenue. CCS will not become cost effective or technologically efficient in time to make a significant difference.
Wind power should be part of Wyoming’s future.
Wyoming has world class wind resources but we lack interstate transmission. We have the prospect for mega wind projects but they will depend on the resolution of market conditions in California. These projects will take longer to develop than many folks have anticipated. They need to be developed within in the next decade or they face the risk of being made obsolete by distributed generation and transmission.
Carbon capture and storage (CCS) technologies should be part of Wyoming’s future.
It may make sense for Wyoming to participate in research on CCS, but large scale deployment seems unlikely in Wyoming and the US. Maybe globally. I am writing a book chapter on this issue right now.
Wyoming’s economy is overly dependent on energy production.
But Wyoming has taken advantage of the resources that it has, just as every state attempts to. Wyoming is trying to diversify its economy but its small population and distance to markets are limitations that are tough to overcome.
Wyoming should try to diversify beyond energy and tourism in the years to come.
Efforts should be made to do this. But we need to change our tax system if we are going to get the benefit, in terms of revenue to the State and local governments, to fund the services to support a more diverse economy.
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.
It will take a decade at least, which may make the technology obsolete because it will be displaced by better and cheaper energy supplies.
Within 5 years, California will be using Wyoming generated wind-power.
Getting California to agree to take Wyoming wind power will take several more years. We have one mega project ready to build but it won’t get started until there is certainty in the California market. Maybe by 2025 but that is probably optimistic.
The national regulations set forth by the Clean Power Plan will be repealed, or abate in some manner.
Under the Trump administration this is probably likely. But that will not revive the coal industry and the country will not start building new coal plants. It will hasten the transition to natural gas and may delay renewable energy deployment.
Other coal producing regions of the U.S. will rebound and successfully diversify their economies beyond coal dependence.
Maybe slowly but this will take a long time. Coal will stop being produced in Appalachia, except for metallurgical coal for export.
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.
Maybe the Chinese will help CCS to develop but unlikely in India. The world is moving away from coal, at least the developed world. China has a large commitment to continue to burn coal, but whether they will find it economical to try to perfect CCS is questionable.
Within 5 years, renewable energy will reach price parity with fossil fuel energy, creating a global renewable energy explosion.
It has already reached price parity in some parts of the US. Renewable deployment depends a lot on government policies and those are changeable and sensitive to global economics. The US will continue to see renewable development unless the Trump administration significantly interferes. Rooftop solar may make significant inroads into areas where conventional infrastructure does not exist.
India is the next frontier for CCS technologies.
Maybe, but frontiers can take a long time to develop, think decades. India has huge coal resources but it is too poor a country to invest in CCS and there are few incentives for it to do so. India’s pledges in the Paris Accord NDC are focused around forest preservation and other activities that do not require large capital outlays.
The world’s largest economies, the USA and China, should be cooperating with each other in developing and scaling clean energy projects.
In an ideal world yes, but these projects are more likely to be built in China than in the US. US permitting delays, environmental sensitivity and adverse economics will all conspire to make CCS lag in the US.
Part 2 - Short Answer Questions:
What steps do you think Wyoming should implement to combat layoffs in the coal industry?
The coal labor force is going to shrink and there is little Wyoming can do to prevent it. Wyoming’s coal industry is at the mercy of US and global energy economics.
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?
There have been a few successful retraining programs but they take a lot of investment and the results are likely to be limited. Wyoming can try to do this but it should not have high expectations for successful results.
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?
The State could help itself by making changes to its tax system, which is currently overwhelmingly dependent on mineral extraction. The changes are not easy or politically attractive but they must be done if we are to move to a new economic model. Nationally, environmental and energy policies can help Wyoming but they can also hurt. Promoting natural gas development depresses Wyoming’s coal economy but helps other aspects of the Wyoming and national economy.
What is a higher priority for Wyoming, developing energy (coal, wind) on Wyoming’s federal land, or protecting it?
Coal will continue to devour land (which will be reclaimed) in certain locations in the state and those locations are not likely candidates for conservation efforts. Wind energy has large landscape level impacts. If we are smart we will develop wind energy in places where the view shed is not of high value. Other locations with high value view sheds may get protected, but that will likely be a big fight.
Is there a state that has successfully implemented state legislative policies that Wyoming could replicate?
There are probably policies in a number of states that could be useful models for Wyoming, in small instances. But every state struggles and benefits from its own economic advantages and disadvantages and there are no easy solutions. I don’t know of any single sets of policies from other states that would materially change Wyoming’s status.
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?
This may sound heretical but we need to ask ourselves whether State governments are the proper place for setting and funding R&D priorities. Isn’t that what private businesses and Universities are supposed to do? State governments generally are not very good at this sort of undertaking. The State does not do basic research very well. The State can throw money at any of these ideas, and it has, but the success rate is poor and we don’t have excess capital to spend trying to fund the one or two ideas that may contribute to helping solve the problem long term, but may not.
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 am not sure that Wyoming, i.e. the State of Wyoming, should be investing in anything related to grid modernization. Private companies may want to invest in long distance transmission, but that will be their decision. Most grid modernization will occur at or near the big load centers.
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?
There is a big market internationally for oil and refined oil products. We are starting the process to ship LNG and that will likely continue, although the cost of facilities is very high. There will be small demand for thermal coal from Wyoming, it won’t be a large percentage of the coal produced in Wyoming. There may some additional port capacity for coal on the West Coast but it will take much longer than originally planned to get It permitted and built.
How much of a global market do you think there is for coal-based industrial chemicals and other end-products of coal conversion?
It is not my area of expertise. I can only speak from experience. I represented DKRW in its early phases trying to develop a billion dollar coal to liquids plant near Medicine Bow, WY. The developers thought they had a perfect market solution, they planned to produce road grade diesel and sell it into the Front Range market. Unfortunately, those plans collapsed as the price of oil fell, the market became glutted with product and there were no other viable end products from the conversion process that could be economically sold. The obvious lesson is that for these large plants the markets are very fickle and whatever they think they may be able to produce and sell may evaporate over the long time it takes to permit, finance and build a facility.