union pacific coal

A Union Pacific train carries coal through North Platte, Nebraska. The coal industry has seen growing competition from natural gas, wind and solar power.


President Donald Trump’s removal of the United States from the Paris Agreement climate plan won’t provide a lifeline to the ailing coal industry — even in a state like Nebraska that burns a lot of it.

Utilities, railroads and other users and haulers of the black stuff say that when it comes to the move away from coal, the train has already left the station.

Even in Nebraska, the only state that increased its reliance on coal to produce power in the 10-year period between 2006 and 2016, a closer look at electricity-generating data shows a different pattern more recently: Since 2013, coal’s share of the market has actually fallen.

So while Nebraska utilities still gobble up coal to produce power, they’re using a more varied mix of sources to make electricity — bringing wind, solar and natural gas into the picture. And those other sources are only growing over time as coal falls.

Other states such as nearby Iowa are moving even more quickly away from coal: MidAmerican Energy had transformed its resource mix to 31 percent coal at year-end 2016 from 70 percent in 2004. Nearly 50 percent of its electricity came from wind at the end of last year, and the Berkshire Hathaway-owned utility is set on getting as close to 100 percent as it can.

Meanwhile, the broader coal industry is trying to recover from a disastrous year in 2016.

U.S. coal production fell to 728 million short tons in 2016, down 17 percent from 2015. It was the lowest level since 1978 and is down nearly 40 percent from its most recent peak in 2008, according to the U.S. Energy Information Administration.

Experts at the federal data repository attribute declines to relatively low natural gas prices, mild winters that resulted in lower electricity demand and a growing share of generation from renewables, all of which are driving an ongoing wave of coal plant retirements.

In a June 1 speech, President Trump withdrew the United States from the Paris Agreement’s global concessions on climate change. The president has pledged to come to the rescue of the U.S. coal industry.

But no matter how loud the choruses of support or opposition that followed Trump’s announcement from the White House Rose Garden, many electric industry analysts are convinced that not even the most ambitious plans to roll back Obama-era climate change rules will help coal’s fortunes.

And the momentum of towering wind turbines, thousands of acres of solar panels and a glut of inexpensive natural gas will continue to cast a pall of shadows over the U.S. coal industry, energy experts say.

It’s “looking more and more likely” that early 2017 coal production increases from mines in Wyoming’s Powder River Basin — the largest source of coal in the United States that feeds Nebraska coal-burners and those in about 30 other states — will be short-lived, analysts for Seaport Global Securities wrote in a research note to clients last week.

Three months before Trump’s anticipated withdrawal from the Paris accord, Moody’s Investors Service analyst Swami Venkataraman said the president’s rollback of climate change-focused agreements and regulations was not expected “to reverse the trend or bring back the idled production” of closed or mothballed coal mines.

Says Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming: “It’s very difficult to make a bullish argument for coal.”

Godby points back to the pre-recession U.S. economy as instruction for how things have changed.

The explosion of oil and natural gas extraction from previously inaccessible shale deposits using hydraulic fracturing, or fracking, was the first domino to fall in the mid- and late 2000s.

That, Godby said, is what opened the door for less-expensive natural gas to usurp coal as the most common fuel for electric generation last year for the first time ever. (As an added bonus, carbon dioxide emissions from natural gas equal about half those of coal.)

“Once 2008 came and fracking hit, suddenly coal in its then-major position as the dominant form of (electricity) generation started going down. Natural gas went up and almost mirrored the reflection of coal going down,” Godby said.

Another big factor: As the economy recovered, it became clear that increases in energy efficiency from appliances, lighting, buildings and the like had disconnected growth in gross domestic product from growth in electricity demand. Before, GDP growth and electricity demand were tethered to each other.

Add in growth among renewable generation like wind and solar, which have steadily gotten less expensive, and coal’s position atop the U.S. energy mix has become increasingly precarious.

So what explains the apparent disconnect between Nebraska and the rest of the country, which seems to be unable to dump coal fast enough? Simply put, it’s the state’s proximity to Wyoming coal mines and the relative distance from abundant natural gas stores, says Brian Park, coal analyst for the Energy Information Administration.

Pennsylvania, for example, is situated atop two massive shale deposits; being close to a cheaper fuel has reduced coal’s share of electricity generation there by nearly 56 percent compared with 2006, the Bloomberg analysis showed.

Conversely, Nebraska is essentially the first stop for railroads shipping coal out of the Powder River Basin to the east.

Transportation costs can send the delivered price of coal — which costs $10 at mine mouths in Wyoming — up another $40 once it arrives at coal plants in Texas or Indiana, Park said. But Nebraska buyers like the Nebraska Public Power District enjoy far lower costs.

As NPPD President and Chief Executive Pat Pope is fond of boasting, coal costs at Gerald Gentleman Station near North Platte are “among the lowest in the world.”

Indeed, delivered coal costs to Nebraska plants in March were the lowest in the United States and more than 50 percent below the U.S. average, according to the Energy Information Administration. Conversely, the cost to deliver an equivalent amount of natural gas here is about 37 percent higher than the U.S. average.

The Gerald Gentleman facility is the largest power plant in the state and, as far as Pope is concerned, will continue burning coal for the foreseeable future. The fuel comprised 48 percent of NPPD’s total generation in 2016.

And, Pope says, it adds valuable diversity to the utility’s generation fleet, which also includes about 32 percent nuclear power and about 14 percent hydropower and wind.

But because natural gas prices now set the bar for national electricity prices — and because Nebraska is situated amid one of the richest wind-resource regions in the country — NPPD’s coal plants have been running less frequently.

Meanwhile, Nebraska’s other major utilities in Omaha and Lincoln have been scrapping coal units to adjust their portfolios to better reflect the new normal.

Lincoln Electric System at the end of this year will break a decades-long partnership with NPPD at a small coal plant southwest of Lincoln from which it has bought power since the 1980s. Its fuel mix will move nearer to about 33 percent each for coal, natural gas and renewable energy.

At the Omaha Public Power District, management has converted three of five coal boilers at its North Omaha plant to run on natural gas. After the utility shut down its nuclear plant at Fort Calhoun in October, it doubled the portion of electricity it derives from wind to about 30 percent.

To be sure, coal will still play a strong role in Nebraska electricity generation for years to come. One of the last new coal plants to be built in the United States is owned and operated by OPPD, which sells a portion of output from the Nebraska City 2 plant, built in 2009, to NPPD.

Nationally, the picture is far less clear. Nearly 90 percent of U.S. coal plants were built before 1990, according to the Energy Information Administration, and environmental activists like the Sierra Club are fighting to expedite the closure of scores of them — and Nebraska utilities aren’t off their radar.

“We’ve added coal-fired capacity in Nebraska, and that’s going to make it an outlier probably for a few years,” said John Crabtree, Nebraska representative for the Sierra Club’s Beyond Coal Campaign. “You see Mid-American Energy over in Iowa moving toward 100 percent clean energy, and doing that realistically and relatively rapidly.”

NPPD, by comparison, has been decidedly slower when it comes to winding down its coal facilities and incorporating significant volumes of wind into its portfolio, Crabtree said.

Officials at the Columbus-based utility say there’s more than meets the eye, however, since its workhorse Cooper nuclear plant is emissions-free; combined with generation from wind and hydropower resources, nearly half of its total generation in 2016 had no carbon emissions.

Plus, the low rates enjoyed by Nebraskans relative to ratepayers in most other states are due in no small part to the cost-effectiveness of Powder River Basin coal.

“When you’re burning $10 coal, you’re not one of the plants” that has been muscled out by natural gas, Godby said. “And those plants can continue to operate.”

The Omaha World-Herald is owned by Berkshire Hathaway Inc.

cole.epley@owh.com, 402-444-1534

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