At the outset, let us agree that most people would like to see the 400 billion tons of coal under western North Dakota put to economic use. After all, we dreamed that dream for decades.
But the reality is that using lignite for coal-burning generators is no longer feasible, economically or environmentally. Nevertheless, the legislature made a major effort to float the industry through the next five years, hoping that coal can be made more economically and more environmentally feasible.
No coal market
According to the U.S. Energy Information Administration, coal consumption in the United States has declined from 98MMst in 2000 down to 48MMst in 2019. In 2020, the market required less coal than any year since 1905. And the market will continue to decline until the last power plant is shuttered.
The Rocky Mountain Institute claims that “nearly every publicly-traded U.S. coal company has been through at least one bankruptcy….” Just last year, eight U.S. coal mining companies filed for bankruptcy, Yale Environment 360 reports.
Yale Environment also alleged that insurance companies are no longer willing to underwrite the cost of coal-fired power plants so none will be built. Other possible investors are nowhere to be seen.
The certainty of the decline of coal is accepted by everyone familiar with investments and coal prospects. That is, everyone except North Dakota legislators.
Coal Creek sale?
One hope expressed is the sale of the Coal Creek station at Underwood, scheduled to be closed in 2022. Investors with that kind of money are not going to buy a plant abandoned for lack of a market.
New owners would go down with the plant. They would still have to compete with natural gas, an energy source that is cheaper and cleaner. They would also have to meet standards being pushed by the national administration to clean up the atmosphere.
While compliance with energy regulations is a problem for coal companies, at the time the Coal Creek closure was announced last year, an official of the parent company, Green River Energy, cited low-priced wind and natural gas as the villains.
Delaying the inevitable
But the legislature decided to bail out the coal industry rather than accept the economic realities. According to a news report by Adam Willis of the Fargo News Service, here is what the legislature did:
Processed over 20 bills designed to boost the coal industry.
Created a “tax holiday” for coal, eliminating $100 million in coal taxes over the next five years.
Established a Clean Sustainable Energy Authority with $25 million for grants and loans to underwrite low emissions projects.
Created a credit line of $250 million in the Bank of North Dakota to be used by a consortium with a $1 billion pool for a carbon capture program.
Adopted coal-friendly legislation and hobbled wind and solar energy as much as possible.
No transition plan
Reported last year in this column were plans of some states to assist in the orderly closure of coal-fired generating plants. In this past session, no thought was given to protecting the employees and communities impacted by closures.
This lack of foresight at the state level has created a vacuum that some would like to fill with a White House Office of Coal Community Economic Transition.
This is history repeating itself. Many of the functions now performed by the federal government were state functions at one time but neglected until public demands pushed them up to the federal government. Then the states complained about centralization of government.
Because the states are not making transition plans, it is safe to predict that the federal government will establish that White House Office to transition coal communities and employees.
Lloyd Omdahl is a former state lieutenant governor and professor at UND.