Cloud Peak Energy near Decker (MIS)

A Burlington Northern Santa Fe train is loaded with coal in this aerial view of the Cloud Peak Energy Spring Creek Mine near Decker. Cloud Peak, which mines coal in Wyoming and southeast Montana, reported a $215 million loss in 2015 as coal exports floundered.

LARRY MAYER for Missoulian

BILLINGS – In Rosebud County, where coal is king, Robert Lee and his fellow county commissioners asked the state Department of Revenue what it would mean to the county’s bottom line if half of Colstrip Power shut down.

Montana’s tax collector responded in three sobering pages, which Lee thumbed through Friday at his commissioner’s desk. Colstrip Power Plant, which is actually a complex of four different coal-fired generators collectively cranking out enough electricity for 1.6 million homes, pays for 80 percent of the taxes in Rosebud County, population 9,329.

Coal’s in trouble because of the changing world markets and tougher pollution regulations. The shuttering of Colstrip units 1 and 2 seems more likely by the day.

“What we’re talking about is $14.2 million. That’s what the county, the schools and the state are going to lose,” Lee said. “It’s about $4 million in Rosebud County.”

The county and the local school district would probably both raise taxes to fill the void, Lee said. The real loss will be to the workers and businesses tied to Colstrip. Right now, a lot of political energy is being spent on fighting regulations and trying to keep all of Colstrip operational, which is the focus of Lee and Montana’s pro-coal politicians.

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But what if coal doesn’t make a comeback, asks Chris Mehl of Headwaters Economics. On Friday, the economic research group in Bozeman issued a study mapping coal’s steady economic decline. Because of competition from cheap natural gas, as well as regulatory pressure and sagging export sales, coal isn’t likely to rebound, Headwaters concluded.

Montana’s four primary coal counties – Big Horn, Musselshell, Richland and Rosebud – are going be harmed as coal collapses, Mehl said. The state’s focus should be on coming up with a plan to help those communities transition, as well as figuring out a how it will replace coal energy and tax revenue from coal.

“The real question is what do you do with these Montana counties that are coal dependent if the property tax base in some of these counties continues to decline?” Mehl said. The rest of the Montana economy will weather the transition.

Headwaters contends that coal’s best years are done. U.S. coal production peaked in 2008 at 1.17 billion tons annually, according to the federal Energy Information Administration. Production in 2015 was 900 million tons.

Last year, natural gas replaced coal as the nation’s leading fuel for producing electricity. Cheaper natural gas, coupled with regulations like tighter mercury pollution controls on power plants, are eroding coal’s energy market share, according to Headwaters.

Coal exports to the Asian Pacific, potentially a major destination for Montana and Wyoming coal, have tanked as global coal prices sink to levels at which exports are no longer profitable. Last week, Cloud Peak Energy, which mines coal in Wyoming and southeast Montana, reported a $215 million loss in 2015 as coal exports floundered. The company forecasted a dim outlook for exports in 2016, as well.

Another challenge is states and energy customers wanting to drop coal power. In Washington and Oregon, where three of Colstrip’s five owners sell electricity, ratepayers and state governments are pushing for utilities to get out of Colstrip.

Puget Sound Energy, which owns half of Colstrip units 1 and 2, is being asked to shut down both units in seven years or less.

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The Headwaters report runs counter to a report released last November by the University of Montana’s Bureau of Business and Economic Research.

The BBER study predicted that 7,500 Montana jobs would be lost in the next 10 years to compliance with the federal Clean Power Plan, which calls for a 47 percent cut in Montana’s carbon dioxide emissions by 2030. Lost property tax revenue would hit $474.5 million in 2030.

Cloud Peak argues that Headwaters is exaggerating coal’s decline.

“The Obama administration’s own forecasters project coal will continue to be an important part of America’s energy mix for decades to come, with a quarter or more of the nation’s electricity coming from coal,” said Rick Curtsinger of Cloud Peak. “In addition, Asian nations, with growing middle classes and millions rising up out of poverty, will need more electricity with much of that generated by coal.

“Crippling not only coal communities but also those that depend on affordable electricity for manufacturing will benefit a select few of the president’s financial backers that have bet big on expensive wind and solar projects. Headwaters’ previous studies have proven faulty and biased, so policymakers should take any new findings from them cautiously and find out who commissioned their work.”

That forecast for U.S. coal use cited by Curtsinger comes from the Environmental Protection Agency’s Clean Power Plan.

In 2014, Cloud Peak’s Spring Creek Mine paid Montana $42 million in taxes and coal royalties, Curtsinger said. The coal company also spent $18 million on goods and services and contributions Montana.

Cloud Peak contends that coal has a role in America’s future even if natural gas prices remain low. Natural gas development will require pipelines and other infrastructure, which assures coal will be in the mix.

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