It’s been 32 years since Wyoming produced less than 200 million tons of coal, a streak that’s about to be broken “short of a miracle,” says one of the nation’s leading energy economists.
With less than nine weeks remaining in 2024, Wyoming’s coal mines need to produce 40 million tons of coal to keep the run of 200-million-ton production years alive, said Rob Godby, an energy economist and University of Wyoming associate professor.
“To hit 200 million tons, you’d need another 40 million tons mined in nine weeks, and that ninth week is always a partial week,” he told Cowboy State Daily.
That’s an average of about 5 million tons a week, which Wyoming’s mines haven’t hit for any week so far this year, he said.
That means that overall, “it’s going to be a disappointing year” for coal, Godby said. “Clearly, the story is going to be the first half of the year that’s killed coal production for the year.”
A combination of an unusually warm winter along with massive stockpiles at power plants led to Powder River Basin coal production to be down more than 20% year-over-year for the first half of 2024.
And the second half so far hasn’t been much of a rebound.
Although the 52.9 million tons produced in the third quarter was a huge spike from the 39.7 million tons reported in the second quarter, it was still more than 15% short of the 62.7 million produced in the third quarter of 2023, according to the federal Mine Safety and Health Administration (MSHA).
Deja Vu
The overall outlook for the end of the year and the first quarter of 2025 gives Godby a little glimpse of déjà vu.
The power plants “still have such huge stockpiles, that we’re where we were last year with them as high as it’s been,” he said. “I would argue you can really see the really significant decline we had in the first six months of the year (repeating). It’s not like the companies need more coal now.”
While Godby said a market more favorable to natural gas than coal and a decade of decline don’t paint a pretty picture for Wyoming coal, that doesn’t diminish the commodity’s importance to the Cowboy State.
“I know as well as anybody what this means for the state,” said Godby, who also is a member of the group that puts out the Consensus Revenue Estimating Group (CREG) report twice a year.
In fact, the state’s economy now relies more on oil and gas revenues that it does on coal, he said.
“We’ve now become most dependent on the most volatile commodity — oil — and that puts us in a pretty risky situation,” Godby said.
That’s because while oil is producing revenue for the state, now at about $70 a barrel, it’s also unpredictable and prone to crashes, he said.
“It’s not clear we will continue to produce at this level with oil,” he said.
What A Difference A Decade Makes
The Powder River Basin, which produces 97% of Wyoming’s coal, is on the verge of a seismic shift that will lead to mines closing and potential consolidation, Godby said.
It’s already been happening for the last few years with Arch Natural Resources, which has been trying to sell its Black Thunder and Coal Creek mines in the PRB while also preparing to shut them down.
Black Thunder used to be the second most productive coal mine on the planet, behind only its neighbor in northeast Wyoming, Peabody Energy-owned North Antelope Rochelle. A decade ago in 2014, Black Thunder by itself produced 101 million tons of coal, while North Antelope Rochelle hit what remains a single-year record of 118 million tons.
In comparison, last year in 2023, Black Thunder produced 60.5 million tons (a 40% decline) and North Antelope 62 million (47% down).
Overall, the Powder River Basin produced 230.5 million tons last year, compared to nearly 382 million tons in 2014.
And while the expectation is Wyoming and the PRB won’t crack 200 million tons for 2024, that will be less than half of coal’s heyday for the Cowboy State. From 2006 through 2011, the Powder River Basin was over 400 million tons each year, hitting an all-time high of 446.5 million tons in 2008.
With Arch’s thermal mines on their way to closure, that opens the door for Peabody Energy to take over Arch’s contracts, Godby said. With the reduced production levels — and that there hasn’t been a new coal lease sold in Wyoming since 2012 — it can do that with its existing resources.
“Effectively, Peabody would like to take over that market, and that might lead to a profitable end game for whoever’s left, not having price competition for the high-BTU coal in the southern part of the basin,” he said.
The real challenge is natural gas being more affordable for power plants and an accelerated schedule to close coal-fired plants, which means the market for thermal coal will continue to shrink, Godby said.
The trouble isn’t a lack of coal or access to new federal leases.
The mines “all have enough coal to satisfy the market — they’re not running out of coal,” Godby said. “But it looks like you’re running out of customers.”
Greg Johnson can be reached at greg@cowboystatedaily.com.
