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For Wyoming coal’s future, a Gillette senator looks to the past

Few in Gillette mind waiting at train crossings, sometimes for 10 minutes or more. Few here worry about coal dust blowing off the tops of the cars and polluting local waterways. Few here complain about coal trains at all — in fact, as the past year’s long slide for coal has shown, people here sorely miss them when they’re gone. Trains mean the mines are running, family members and friends are working and revenue is flowing into city coffers. But such is not so in the other towns along the coal trains’ routes west towards the coast. From Gillette, trains run through Sheridan and Bozeman, Helena and Missoula, Spokane, Washington and Sand Point, Idaho. In those towns they are frequently far less welcome.

Towns complain about the hold-ups for automobile traffic and the possible decline in the rail traffic of other freight, plus the potential that emergency responders might not reach their destinations in time because a mile-long coal train is splitting the town in half. Environmentalists worry about coal dust blowing off the uncapped coal cars, or about big coal spills from train derailments. Towns that aren’t built on coal like this one have little love for the long trains, or what they’re often seen to represent – a carbon-burning energy grid they’d like to put behind them.

Senator Michael Von Flatern (R, S-24, Gillette)

Senator Michael Von Flatern (R, S-24, Gillette)

But here in Gillette, Senator Michael Von Flatern (R, S-24), a soft-spoken legislator with over 12 years in Wyoming’s state senate, has a plan for getting coal to the coast that he thinks will assuage those towns’ concerns about coal trains, and perhaps save his own town in the process. It’s not a new idea, and in fact it was tried before in the 1970s and ‘80s, when it eventually burned out amidst political opposition from a variety of parties.

What Von Flatern is dreaming of is a coal slurry pipeline. The line would carry coal, mixed with water into a slurry that could travel along a pipeline to potential ports on the west coast, with Asia – Korea and Japan, Von Flatern says, but also possibly China – as the end goal. At least that’s the end goal given the markets as they now stand, he said. No route has been firmly discussed, and for now the idea remains just an idea. However, one possible destination could potentially be the Millennium Bulk Terminal in Longview, Washington, a proposed coal port which is still in the environmental impact consultation process.  

The senator says he is talking with an informal working group, including people from the Wyoming Business Council, the Governor’s office, the Wyoming Infrastructure Authority and the Western Research Institute, which is associated with the University of Wyoming. However, he says that at this point it’s pretty much just his idea, born out of thinking how to keep his town competitive. “I’m just trying to move my coal out of this corner of the state,” he said. On December 15, he’ll present his idea to the Wyoming Pipeline Authority, a semi-governmental organization dedicated to promoting energy infrastructure – namely, pipelines. He hopes they’ll have some input on a next step, and on the idea’s feasibility.

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Railcars are loaded with coal at Arch Coal’s Black Thunder Mine outside of Wright. (Andrew Graham/WyoFile)

Von Flatern thinks a pipeline has a chance at generating support in part because of all the arguments against coal trains. The issue has been a long-burning one in towns along rail routes to the Northwest. In November, BNSF Railway settled a lawsuit with the Sierra Club, the Natural Resource Defense Council and five other environmental groups who alleged that the coal trains had violated the Clean Water Act via coal chunks and coal dust flying from trains as they hit rough sections of track. BNSF agreed to pay $1 million toward environmental projects, and also to research the possibility of covering coal cars in the future, an added expense for freight.

A pipeline, Von Flatern said, eliminates many of those arguments. It would contain dust and coal (barring the threat of a pipeline spill, presumably), and would not cause the traffic problems of the often long coal trains rumbling through town.

Von Flatern is chairman of the senate minerals committee and vice-president of the senate. Thus far, he said, he does not have any specific legislation in mind to promote his idea. It may take some action from the legislature, he said, but it may not take any at all. He is hoping to interest a private company for financial backing. “The state has no place in this,” he said, “other than that we would be the beneficiary of the revenue stream.” However, he doesn’t rule out perhaps trying for a resolution in support of the idea.

If this idea is ever to become reality, it will most likely have to overcome immense political challenges. The 1970s attempts at a coal pipeline out of Wyoming faced opposition from strange bedfellows – ranchers and environmentalists – over the amount of water moving the coal entailed. But more potently, it faced the monied opposition of the railroad lobby. While the environmental coalition fought it, the railroads killed it. Von Flatern anticipates the same opposition from railroad companies. At the same time, today’s environmental groups are concerned with far more than just water, as many want to see the global energy system move past fossil fuels in the face of climate change. As fierce protests play out against the Dakota Access Pipeline in remote North Dakota, the way forward for large energy projects could be hotly contested.

As importantly, in the 1970s the Powder River Basin mines were humming, and coal-fired power plants were popping up as new customers for Wyoming coal across the country. The picture is very different today. If Von Flatern’s first step is finding an industry backer who will see profit in a pipeline, his first challenge may be the coal market itself.

Wyoming’s PRB today

Coal production in Wyoming’s Powder River Basin mines during the third quarter of the year, running from June until September, was up by nearly 30 percent compared to the previous quarter, according to production data on the Wyoming State Geological Survey’s website. That’s still almost 15 percent less production than in the same quarter in 2015.

However Donald Trump’s election victory led to a big upswing for coal companies on the stock market. The price of stock for Peabody Energy, which remains in bankruptcy proceedings, nearly doubled in the days after the election. Investors’ confidence may stem from the president-elect’s campaign promise to dismantle the Clean Power Plan, seemingly solidified by his September appointment of Myron Ebell, who has long decried the idea of climate change, as transition leader for the EPA.

Still, coal’s recent decline is widely considered to be more a result of market competition from cheap natural gas prices than a regulatory problem. Natural gas surpassed coal as a provider for U.S. electricity generation in 2015, and researchers have since cemented the relation between shale gas and coal’s decline.

If President-elect Trump does move successfully to end the Clean Power Plan, it might prolong the life of some existing coal-fired power plants, but it won’t make refurbishing aging plants or building new ones any more attractive to utility companies or financiers, said Tom Sanzillo, an analyst with research group the Institute for Energy Economics and Financial Analysis – a non-profit think tank focused on research that will “accelerate the transition to a diverse, sustainable and profitable energy economy,” according to their mission statement. No serious observers think that the drive to curb carbon emissions will simply go away with a Trump presidency, Sanzillo said.

Von Flatern echoes that analysis. “Does that mean California, or New York, or anywhere else is going to say ‘oh yeah, that won’t come back in four years?’” he asked, referring to the Clean Power Plan and carbon regulations. He’s betting the answer is no.

Von Flatern began thinking of this project well before the election. November 9th didn’t change anything for him – with the long term impact that a Trump presidency would have on domestic coal markets remaining to be seen, Von Flatern is still looking to Asian markets as an end goal.

In October, 55 countries ratified the Paris climate change agreements, committing to reduce carbon emissions, and thus their coal burning, to try and limit global warming to below 2 degrees Celsius above pre-industrial levels. Scientists have said warming at a rate above that could have devastating impacts around the world, including sharp sea level rise.

Coal use appears to still be rising in both China and Japan, however, despite the 2015 Paris agreements to slow global carbon emissions worldwide, which both countries signed. In China, coal use had appeared to be dropping since 2013, but has now started to pick up again.

Thus far, coal-exports to Asia have remained a niche industry for the U.S., according to IEEFA. Coal exports are low because of the less-competitive pricing of coal from the U.S. versus competition from India, the Koreas, Indonesia, Australia and other coal-exporting countries. “When U.S. exports increase it usually means the global market is past its peak,” said a recent IEEFA report.

Sanzillo points to coal export data from the U.S. to China over the last few years to highlight his point. In 2012, U.S. exports to China hit their highest volume since 1990, at over 10 million tons a year. Then exports started dropping, to 8.2 million tons by 2013, 1.7 million tons in 2014 and only 230,000 tons in 2015. That’s a 97 percent decrease.

Meanwhile, China’s import numbers dropped over the same period, but at a much lower rate – a decrease of only 40 percent. When demand drops in Asia, and the markets become oversaturated with coal, “the U.S. gets thrown out,” Sanzillo said. “Because they’re the least competitive.”

However, Von Flatern believes Korea and Japan represent better markets than China. Japan, he says, has been burning more coal ever since some nuclear power plants were taken offline in the wake of the Fukushima disaster.

Coal ports on the west coast could help Wyoming coal become more competitive on global markets. That’s why the Wyoming legislature in 2015 passed a bill allowing the state to issue up to $1 billion in bonds to finance the construction of a coal port in the Pacific Northwest or elsewhere. “What Wyoming mining is doing is they’re always trying to figure out a new way in,” Sanzillo said. Thus far, most attempts at a coal port have met with opposition from coastal communities in Washington and Oregon. Out of six coal ports once proposed in Washington and Oregon, only one proposal, for the Millennium Bulk Terminal in Longview, WA, remains. That project faces opposition from the Cowlitz Indian Tribe, as well as many environmental groups. The comment period on its Environmental Impact Statement recently closed, and the final statement is expected to be released in the middle of next year.

Von Flatern has referred to Longview as a potential destination for the coal slurry pipeline. Much of the opposition to port proposals in the past has stemmed from the arguments against coal trains, while three of the Pacific Northwest ports, including Longview, have faced opposition from Native American tribes concerned with impacts to tribal lands and culture.

Von Flatern hopes the idea of a pipeline could make it easier for coal ports to gain approval, by easing concerns about increased train traffic. However, even if the pipeline removes the train argument and helps coal ports get approved, it is demand that drives markets, and analysts disagree about the longevity of Asian demand for coal.

“Coal demand in China is sputtering as the Chinese economy gradually shifts to one based more on services and less on energy-intensive industries. New Chinese hydro, nuclear, wind and solar are also significantly curtailing coal power generation,” read a December 2015 report from the International Energy Agency. However, the recent uptick in the country’s coal use seems to belie that prediction.

And of course, Von Flatern’s idea will face far more immediate challenges than long term Asian markets.

Even if it had financial backers, and even with what is shaping up to be a pro-energy Trump administration with an interest in infrastructure projects, any pipeline will need to pass through Montana and into the Pacific Northwest, or through California or other states depending on the route, offering plenty of opportunities for legal challenge from residents and resistance from environmental groups. While environmental resistance has in the past been directed at the trains, much of it is also directed at coal power generally, and there’s no certainty a pipeline would be a welcome alternative.  

New voice for an old idea

Von Flatern, an ex-coal miner, knows the story of Wyoming’s first shot at a coal slurry pipeline. The first iteration of his idea came from a consortium of energy companies that united over 40 years ago under the name of Energy Transportation Systems, Inc., ETSI, in an attempt to export Powder River Basin coal.

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A map shows one existing and five proposed coal slurry pipelines in the 1970s. None of the proposed lines were ever built. The Black Mesa Pipeline ceased operations in 2005, when the coal mine it sourced from shut down. (Map courtesy of Wyohistory.org, originally from High Country News)

The ETSI coal slurry pipeline saga started in 1973—a heady time for coal markets. As retaliation for U.S. support of the Israeli military, the Arab nations of OPEC had imposed an embargo on the United States. This caused oil prices to spike, making coal suddenly an attractive alternative for power plant fuel. New coal fired plants were constructed. At the same time power plants that had previously burnt oil were retooled for coal, just as some coal plants today are being retooled for natural gas.

Wyoming had just come out of a long slump, beginning in the early 1950s when the railroad companies moved away from coal-fired locomotives, completely sinking the state’s first coal mecca, Rock Springs. Mines in that part of the state were underground mines, and in the early ‘70s the strip mines of the Powder River Basin started roaring along, where the coal seemed endless, and endlessly cheap.

Clean Air Act legislation of 1970 and 1977 was another boost to Wyoming coal. Powder River Basin coal is low in sulfur content and when burned by power plants met the requirements of the new federal law, without the installation of expensive scrubbers. Powder River Basin coal also offers massive economies of scale, with coal seams that can reach 70-feet thick, compared to Appalachian coal seams a few feet thick. While low in sulfur and cheaper to produce in quantity, PRB coal was also lower in energy content and had a longer trip to midwestern power plants than coal from longstanding Appalachian coal mines. Were it not for the Clean Air Act, the Powder River Basin may not have been competitive with Appalachia.

It was, said University of Wyoming historian Philip Roberts, “one place where federal regulation did us a big favor.”

Two obstacles slowed the 70s era dreams, embodied by ETSI, of a coal pipeline from Wyoming mines. One was water, or Wyoming’s lack of it, and the other was the railroad companies.

To provide water for the ETSI pipeline, the company planned to drill deep wells into the Madison Formation aquifer in Eastern Wyoming. The company estimated it would pump out 20,000 acre-feet of water a year to move 37.4 million tons of coal out of the Powder River Basin. The measurement of acre-feet refers to the amount of water it would take to flood an acre of land with a foot of water.

The threat of losing all that Wyoming water to a pipeline created a rare unified front of resistance between ranchers, municipalities and environmentalists. “You get those all arrayed together and you get them in front of the legislature, and no, you’re not going to have a lot of legislative support,” Roberts said.

The Powder River Basin Resource Council still cites their opposition to the ETSI pipeline today. “Our organization has a long history of opposing bad ideas to export Wyoming’s precious water supplies – dating back to the proposed coal slurry pipeline – and we will continue to do so,” read a legislative update from the 2016 budget session, referencing a law to allow export of the state’s groundwater in the use of energy projects.

In the 70s, water from the Madison Formation was planned to be pumped to Gillette, where it would be mixed with coal and enter a pipeline heading to power plants in Kansas, Oklahoma and Arkansas. Two other pipeline companies proposed similar ideas from Gillette. One proposed to carry coal to Oregon and Washington, and another to Houston.

This last pipeline, proposed by Texas Eastern, would have required water from the Little Bighorn River. This touched off a battle with the Crow Tribe in Eastern Montana, which at the time claimed rights to all the water in the Little Bighorn. The prospect of possibly a decade or more of litigation over that issue was discouraging to companies considering coal pipelines, Dan Whipple reported in High Country News in 1979. Lawyers for the companies “said it would take 10 or 15 years to finally settle the issue, so we abandoned it,” one unnamed industry source said at the time.

ETSI, for its part, engaged in a bitter dispute with the railroad companies. Seeking to maintain their monopoly on coal, the railroads refused to give pipeline companies rights of way to cross their lines. In order to reach Arkansas, the ETSI project would have to cross railroads 65 times. Unable to secure eminent domain rights from either federal or state governments, ETSI took railroad companies to court 65 times, and won each time.

By 1978, after years of ETSI-railroad litigation, the Casper Star Tribune reported that the ETSI pipeline was on “the verge of construction.” But the railroads got the last laugh. ETSI lost a key coal supply contract with an Arkansas utility. The contract went to Chicago & Northwestern Railroad instead.

As Whipple later wrote for WyoHistory:

“All of this sound and fury ended up signifying nothing, as Shakespeare says. Or as far as actual construction goes, very little. None of these slurry pipelines were ever built. ETSI, generally viewed in the business community as the strongest proposal, lost about $145 million.”

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A car waits at a railroad crossing in Gillette. While few here complain about the long coal trains, which are a sign of a strong local economy, in other towns along the trains’ routes they are considered a nuisance, if not a health and environmental hazard. (Andrew Graham/WyoFile)

Despite its failure, ETSI did manage to win over $500 million in lawsuits against railroad companies, who were found to have conspired against the project. ETSI claimed the railroad companies had filed hundreds of lawsuits against the company in towns along the proposed route, according to a Chicago Tribune article from 1990, when the last lawsuit finally settled.

Von Flatern knows that the railroads will fight his idea. He doesn’t know what kind of tonnage a modern slurry pipeline would carry, but doesn’t think it’s unreasonable to estimate it’s at least around the nearly 40 million tons suggested by ETSI. “You’d be missing a lot of trains,” he said.

However, he thinks modern technology will give him a good argument with the second group of historic opponents – those against the exporting of Wyoming’s water. Today, a process is being developed at UW to extract moisture from coal before shipping it, Von Flatern said, noting that many PRB mines have tried to apply such a technology, thus far unsuccessfully. His hope is that if the new process works, water could be extracted from coal and then used for mixing the pipeline slurry. The figures are very “back of the envelope,” but Von Flatern said that according to the projections he has, if you were to dry two-thirds of all the coal produced in the southern Powder River Basin mines, then you would produce enough water to ship 40 million tons of coal via pipeline. That’s using the ‘70s era ETSI calculation of 20,000 acre feet of water for 37.4 million tons of coal. He hopes however that modern pumping and pipeline technology would be more efficient.

Perhaps, Von Flatern said, you could ship coal out of San Diego or a port in southern California, and then sell the used water, once it’s been separated from the slurry, to that drought-starved state.

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As for climate change concerns, Von Flatern said a coal pipeline would result in a net decrease of emissions, by cutting out the carbon burned in transportation by rail. If true, he believes that could make Wyoming coal attractive to countries that need to continue burning coal while meeting their emission reduction targets.

From a technical standpoint, Von Flatern believes his rough calculations are theoretically sound, which he thinks gives a pipeline a strong argument. That doesn’t mean it’ll be accepted, however.

“There are still people who are going to want to keep it in the ground,” Von Flatern said, quoting a popular mantra used by those who think an immediate move away from burning fossil fuels is necessary to avoid catastrophic climate change.

Still, “I don’t think it’s a crazy idea,” he said of a slurry pipeline.

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About the Author

andrew@wyofile.com

Andrew Graham is reporting for WyoFile from Cheyenne, where he covers the legislature. Reach him at 443-848-8756 or at andrew@wyofile.com

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4 Responses to For Wyoming coal’s future, a Gillette senator looks to the past

  1. Bob Cherry December 9, 2016 at 7:49 am #

    I give this idea about the same odds of succeeding as I do the brilliant idea of building the greatest wall in history between the United States and Mexico.

    Zero!

    Cody, Wyoming

  2. Dewey Vanderhoff December 6, 2016 at 10:24 am #

    Is Senator von Flatern even remotely aware of the Black Mesa coal slurry pipeline in Arizona ? – the only large coal slurry pipeline ever put into operation , now deceased ? He might want to immerse himself in its sordid history.

    Black Mesa used coal mined from not one but two mines on the Navajo Reservation , and slurried it to the Mojave generating station only 300 miles away in Laughlin NV on the Colorado River, pumped with groundwater from the Navajo Aquifer, pretty much the only source of clean water on the huge Navajo nation. From mine to boiler to discharge, the Black Mesa project was a case study in faux economics and the astronomical anount of corruption that surrounded it. In this case, the Navajo and Hopi and Zuni became their own worst enemies and hired the wrong lawyer , John Boyden, to make a wretched deal with the Devil, named Peabody Coal.

    Not only was the mining permit corrupt with the Black Mesa and Kayenta Mines on teh Reservation being anything but an economic powerhouse for the Tribes, the pipeline was corrupt and the use of the Navajo Aquifer was corruption at its finest. The entire project was lowballed to favor Peabody. Lawyer Boyden claimed tor epresent the Tribes and their best interests, but in reality he was being paid by Peabody and monkeywrenched the entire deal to favor Peabody and their cohort Southern California Edison . Never mind the cloud surrounding the Mojave powerplant. The Navajos-Hopi got ripped off coming and going and saw their precious groundwater carried away and not much money coming back to pay for it.
    Fast forward to today , and the Black Mesa pipeline has been dead for 11 years. The Black Mesa coal mine is dead. The Mohave powerplant was decommissioned in 2009 and is being torn down. Tne Kayenta mine is still turning out some coal, which is shipped by rail to the nation’s third dirtiest coalfired powerplant, the massive old school Navajo powerplant at Page AZ which has done a fabulous job of creating a perpetual haze over the Desert Southwest like the Mohave plant did for the Grand Canyon , and emissions from both were detectable as far north as SW Wyoming. Ask the airline pilots who flew across the region before and after the powerplants about that haze.

    So the Cliff’s Notes version of the coal slurry lesson of Black Mesa is that even with the most financially favorable project , an assured customer, and dark insider deals made on Indian Reservations not federal or state lands, the whole project imploded. The monetary losses were severe, the longterm costs to the environment and Tribes are piling up. The Black Mesa project was a case study in robber barons constructing a failure. Sen. Von Flatern should be mindful of this. Need I add he seems out of touch with the realities of the global coal market ?

    While some of Wyoming’s leadership such as Gov. Matt Mead continue to delude themselves in believing that there is a robust future for Wyoming’s Powder River Basin coal, they are kicking a mostly dead horse. All Senator Von Flatern is proposing now is that we stick a hose up said horse’s derriere and expect a different outcome.

    What part of Dejá Vu all over again do they not get?

    Cody, Wyoming

  3. Paul Heimer December 6, 2016 at 6:40 am #

    Great article. Ironic that Wyomingites think Trump is the answer to their coal dust induced dreams when he is already starting a trade war with China even before he becomes president.

    Laramie, Wyoming

  4. Phil Smith December 6, 2016 at 5:02 am #

    Appreciative of your well-researched article. I now have a better understanding of the PRB coal industry dilemma.

    Thermopolis , Wyoming

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