“A stronger Colstrip is a stronger Billings.” “A stronger Lewistown is a stronger Billings.” “We are working together to bring the best to our region,” said David Trost, President of the Big Sky Economic Development Corporation (EDC). Improving the economic strength of every community, “will strengthen all of us,” said Trost, in welcoming attendees to a summit in Billings of the Coal Country Coalition, last week.
The Coalition was formed three years ago in the face of the explosive news that the Colstrip plants might close, and amid regulatory and market upheavals of the coal industry that raised questions about its survivability in Montana.
Over 95 percent of the coal produced in Montana comes from the 15 counties represented by the coalition, which includes Big Sky Economic Development (EDA), who hosted the meeting. Other members of the coalition include Beartooth Resource Conservation, Southeastern Montana Development Corporation and Snowy Mountain Development Corporation.
The purpose of the coalition is to understand what is happening to coal, outline strategies to deal with it, and to identify future goals to sustain the economies of the impacted communities. A study released earlier this year revealed that two –thirds of the economic impacts of a declining coal industry are impacts to other industries. The study – The Changing Coal Industry — was funded by the Montana Department of Commerce and the United States Economic Development Administration.
It was emphasized that a primary conclusion of the study was that “The future of the Montana coal industry is not pre-determined.”
The most commonly used word during the conversations was “diversification.”
Molly Schwend with Cloud Peak Energy reported that the market is stabilizing for her industry, with natural gas prices hovering at $3 MM BTU and inventories declining. Schwinn noted that one peer company has emerged from Chapter 11 bankruptcy, which they all celebrated, even though they are a competitor.
“Cloud Peak is looking at good things coming,” she said, but “uncertainty” remains the industry’s biggest problem.
Debilitating regulations, most specifically those of the Clean Power Plan, have been pushed back by President Trump, “but it could all happen again in four years,” she said.
Schwend said that her company is dealing with the issue of climate change realistically. “We need to make coal part of the solution to climate change.”
It doesn’t matter whether the claims of climate change are true or not, studies show that 70 percent of the nation believes “climate change is happening and we have a target on our back.” It is no longer a matter of science or technology, “it is political and emotional.”
Utility companies are still closing coal plants, Schwend pointed out; they are not defending coal.”
“Through technology and time the coal industry has delivered results and we need to continue doing that,” Schwend said, “We have a big stake in CO2 capturing and storage underground or using it for enhanced oil recovery.”
The industry is looking, however, for the same kind of subsidies that wind and solar alternative have received from government to conduct research and develop technology. In 2015, the US government spent $12 billion to subsidize wind and solar energy.
In 2017-18 about 31 percent of the electricity used in the US will be from coal fired generation.
A fourth of the coal produced in Montana is used at Colstrip or elsewhere in the state, the rest is exported. (Montana produced 42 million tons in 2011.) All of the electricity that is exported out of Montana goes to the west and northwest. There is no grid to carry it to any other part of the country.
Despite the backing off of some regulations, the coal market is still being manipulated through the regulatory process. Prospects for exporting are diminishing as proposals for building ports in Washington and Oregon are one by one being rejected. Schwend noted that coal is just a small part of the impact that is being imposed on the export of commodities at those ports. Other products too, most especially agriculture also need those ports.
Other aspects of how regulations are impacting coal are efforts to require the industry to put a cover over coal cars, said Jim Atchinson, Colstrip, director of the Southeastern Montana Development Corporation. Despite at least four studies that conclude there is no coal dust emitted from train coal cars, the anti-coal activists succeed in advancing a contrary myth, he said.
Atchison stressed the importance of the coalition to the four counties represented by SMDC. They have been searching for ways to diversify the economy of Colstrip, a community that was created with the birth of the Colstrip power plants, for the past three years. “We are not getting away from coal as the major industry,” he said, but there are other options available to the community, such as high tech, manufacturing, agriculture and tourism.
“We haven’t had the impact yet that some communities have had,” said Atchison, “We haven’t had job losses.” They are trying to get ahead of the likelihood that Plants 1 and 2 will eventually close. “We recognized a need to do something.”
Colstrip has a lot going for it. It is a beautiful community, a good place to raise a family and “property taxes are ridiculously low.” “The opportunities are there,” said Atchison, “Things are happening on the clean coal technology front.”
“The story is still being written. We aren’t into implementation yet. We are looking for funding to hire more help,” said Atchison.
Kathie Bailey, Director of the Snowy Mountain Development Corporation, reported that while Roundup is starting to see some evidence of an economic recovery, through “clean up activity” and the community’s commitment to build a new school, they could face 30-50 layoffs at the mine because of a recent court ruling that may slow mining at Signal Peak mine. She noted that probably two-thirds of those layoffs will involve workers from Yellowstone County. She went on to emphasize that for every mine worker laid off, a community loses five other jobs. When she first encountered that statistic, said Bailey, she was rather skeptical about its accuracy. Bailey said she has since come to conclude, “It is very accurate.”
Constantly under challenge since its inception, Signal Peak is currently battling four court cases, said Bailey. Numerous comments were made from around the room about how many millions of dollars are spent by industry fighting court battles – a huge loss for everyone no matter how the court cases turn out.
Bailey noted that while she was opposed to the tax incentive that Mussellshell County gave to Signal Peak, she now sees that the lower tax rate is allowing the company to better battle their court cases and stay in business. But, businesses can only do that for so long, she said.
“Planning is important but only if it is connected with action,” said Sue Taylor, Director of Beartooth Resource and Conservation. “That is what we are going to do with the study.”
One of the revelations of the study that they can address, according to Taylor, is in learning that Montana is a “marginal producer” because of its distance from markets and because of the taxes government imposes on the industry. That means when companies look at having to close one facility over another, Montana will likely be the first to go.
According to the study the cost of government comprises the greatest cost involved in the production of coal in Montana, with local and states taxes comprising 30-40 percent of the cost of producing a ton of coal. Labor is the second largest cost at 11 percent of sales.
Through the study “we have learned how important it is for our industrial users to have that energy,” said Taylor, adding that while the alternative sources of energy show promise, “it isn’t there yet.”