Wyoming Coal Impacts Study. WIA Winter Energy Conference February 3, 2015

Transcription

1 Wyoming Coal Impacts Study WIA Winter Energy Conference February 3, 2015

2 Scope Previous Impact Studies History of Wyoming Coal Production and Impacts on the State Inventory of coal-fired generation and recent performance data/wyoming electricity market data. Market analysis: Recent challenges Future Opportunities/Challenges 111(d) Outlook/Opportunities Impact Estimates: Wyoming Economy to 2030 State Revenues to 2030 Powder River and Uinta Basin Regions

3 Previous Studies on Coal Impact on Wyoming There aren t any (recent ones, anyway) Most recent studies to look at the entire state date back to 2000 Prior studies in early 1990s. Mid and late ( ): BLM studies on PRB impacts (Campbell and adjoining counties). used for social impact assessments of Federal land leases Summary of non-impact Studies of the PRB.

4 Short Tons Historical Coal Output Figure 1a: Wyoming Coal Production: ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000,000 50,000, : Lowest Wyoming coal production since Wyoming accounts for 39.5% of national coal output. National coal production in 2013 was the lowest since Source: USGS/EIA

5 Market Analysis: Causes of Decline Slow economic recovery and even slower recovery in electricity growth since Natural gas price decline since Expansion of renewables. Other factors: Plant retirements in generation sector Recently: rail congestion in Midwest. Future: Carbon regulation domestically and abroad.

6 Rail Congestion reason for optimism? 2014 Rail Traffic Change Grain 15.0% Oil/Petroleum products 13.4% Nonmetallic minerals 7.8% Other goods 6.2% Total traffic 3.6% Motor vehicles/parts 3.6% Metallic ores/metals 3.0% Forest products 2.8% Other farm products 1.5% Chemicals 1.3% Coal 0.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Percent Increase in Traffic 2014 (as of Nov. 1) Coal deliveries have been challenged in 2014, particularly on BNSF. Threatened regulatory response due to shipper s complaints. Potential opportunity in 2015 as (if?) congestion clears. Source: WSJ and Surface Transportation Board

7 Wyoming Coal Impact Today Coal-mining activity alone: Production: est. 390 million tons (2014) Employment (2012): Direct: 6,902 Indirect: 4,121 (est.), Induced: 5,017 (est.) Avg. Earnings (incl. benefits): Direct: $136,900 (2012) Indirect: $55,400, Induced: $35,900

8 Wyoming: Coal Impact Today Total Impact Generation Railroad Coal Mining Addition to State Product $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6, Dollars (millions) Direct Indirect Induced The Wyoming Coal Economy accounts for 14% of Gross State Product Coal production alone, including indirect and induced effects accounts for 11.3% of GSP.

9 Wyoming: Coal Impact Today Total Impact Generation Railroad Coal Mining Coal-related Employment (2012) Jobs Direct Indirect Induced The Wyoming Coal Economy accounts for over 23,000 jobs in the state annually. Coal Production alone creates over 16,000 jobs annually. Coal mine employment 2012: 6, : 6, : 6,669

10 Wyoming: Coal Impact Today Average Earnings Per Job 2012 (incl. benefits) $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Coal Mining Railroad Generation Direct Indirect Induced Jobs generated in the coaleconomy are high-paying. Benefits can be estimated to be approx. 30% of values shown. Compare: Median Wyoming household income $57,512 in 2012 (does not include benefits).

11 State Revenues: Total 2012 Wyoming Revenue was $11.3 billion. Coal production state revenues alone were valued at $1.26 billion (11.2%). Coal economy state revenues estimated to be $1.33 billion (11.8%).

12 Impact of AML Cap: In 2013, Congress capped AML payments at $15 million This represented a $135 million loss in State revenues at 2012 prices.

13 Million Short tons Coal Forecasts 1,600 1,400 1,200 1, EIA Reference Source: EIA, ICF, IHS EVA ICF IHSGI INFORUM Near-term forecasts indicate flat near-term growth Most indicate long-term declines in coal output. Coal Exports expected to increase slowly in most cases. Despite this forecasts fall. Largest declines in forecasts that incorporate significant carbon reduction.

14 Coal Exports: Wyoming Exports continue through Canada Millennium Bulk and Gateway Pacific Terminal Projects: ~ 100 million ton expansion in export potential by the end of the decade. Challenges: Environmental opposition Falling coal prices in Asia virtual disappearance of margins for exporters New import tariffs/local free trade agreements Financing: domestic conditions/bearish financial sentiment for projects? International carbon regulation/commitments and actions.

15 Potential Impact of Greater Coal Exports: Estimated economic benefit of an additional 100 million tons of Wyoming Coal Exports Increase in Gross State Product: Over $1.2 billion annually. Increase in State Jobs: Over 4,000 new jobs. Increase in State Labor Income: Over $345 million annually. Increase in State Revenue Over $230 million annually. These impacts are for the Powder River Basin Region only. Statewide impact would be larger, but most impact occurs in PRB. Compare to exports of approx. 3 million tons today.

16 Threats to the Wyoming Coal Industry Most important threats to future Wyoming Coal Production can be defined in two categories: Fundamental Market challenges Increased coal production costs (slower productivity growth, increased wage and capital costs) Continued low natural gas prices Continued weak economic and/or electricity demand growth Regulatory Challenges Carbon regulation (domestic and foreign)

17 Threat Assessment: Methodology Fundamental Market Challenges Used EIA AEO2014 modeled projections for Higher/lower than reference coal cost scenarios Higher/lower than reference economic growth scenarios Higher/lower than reference natural gas price scenarios Added EIA impact scenario for low oil prices ($70 Brent crude in ) as a sensitivity test. Assume only market regulations already in law occur (no 111(d))

18 Fundamental Market Outcomes Production Outcomes by 2030: High coal costs: 20% decline (-80 million tpa). Low gas prices: 4% increase (+17 million tpa). Low economic growth: 8% increase (+30 million tpa). Low oil prices: 16% increase (+65 million tpa).

19 Fundamental Market Threats: Employment 6,000 4,000 2, ,000-4,000-6,000 Employment Change (Levels): Statewide Coal Economy from 2012 Reference Case High Economic Growth Low Economic Growth High Coal Costs Low Coal Costs High Gas Resource Low Gas Resource Low Oil Prices Employment growth is anticipated absent regulatory changes in most cases. High cost case would result in over 4,000 job losses by Would also likely eliminate export potential.

20 Fundamental Market Threats: State Revenue 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% -50.0% Total Coal Economy Tax Revenue Change from Reference: Market Scenarios High Econ Low Econ High Coal Cost Low Coal Cost High Gas Res Low Gas Resource State revenues are resilient to most changes. Coal costs are the exception note State interests are the opposite of the Wyoming economy s!

21 Carbon Regulation Methodology Used Rhodium-Group provided NEMS-projections (consistent methodology with EIA projections previously used). Evaluated the same four policy cases Rhodium did in a national study for Wyoming. Use Rhodium-based Wyoming coal production and basin natural gas production estimates. Downscale to state-level gas production, and to state-region gas production. Evaluate economic and revenue impacts due to production changes.

22 Annual Wyoming Production (Mill. Short Tons) Carbon Regulation Coal Production: 111(d) Scenarios Rhodium AEO2014 Reference 111d - National w/ EE 111d - Regional w/ EE GHG $25 inc 5% annually GHG $10 inc 5% annually + low gas AEO2014 Reference 111d - National w/o EE 111d - Regional w/o EE GHG $10 inc 5% annually Maximum decline from 2012: 34% to 51% decline in production depending on policy. Note that impact of 111(d) on Wyoming coal production depends on policy implementation. Energy efficiency and state cooperation most beneficial to coal industry.

23 111(d) Impact on Wyoming: Employment

24 111(d) Impact on Wyoming: Employment Carbon Regulation of power plants will affect both Wyoming s coal and gas sectors. Overall, we find the coal losses are not likely to be mitigated by the natural gas gains. Overall: 2.5% to 3.2% reduction in state employment from baseline in 2030 (equivalent to 7,200 9,300 jobs in the wider economy in 2012). Perspective 9,300 jobs = all job growth in Wyoming since April 2011 (>3.5 years). 7,200 = all job growth since January 2013 (2 years). Best scenarios for coal and wider Wyoming economy include energy efficiency. Wider state cooperation is somewhat better. Depends on gas effects.

25 111(d) Impact on Wyoming: State Revenues

26 111(d) Impact on Wyoming: State Revenues Total state energy revenue losses due to coal decline are not mitigated by increases in natural gas output. Differences in commodity tax rates and the price effects of the regulation may cause a conflict between state revenue maximization goals and wider economy interests. Worst state revenue scenario is the best scenario for coal production and the wider Wyoming economy.

27 111(d) Conclusions State economy best served if energy efficiency is widely used as a carbon mitigation policy nationwide. Widest possible state cooperation nationwide would benefit Wyoming most. Projected losses due to 111(d) outweigh even best coal export scenario. State may have to prioritize: state economy vs. its own revenues in implementing its carbon mitigation policy or in how it chooses to attempt to influence how other states do so.

28 Conclusions Coal economy accounts for significant portion of Wyoming economy Over 23,000 jobs, 14% of Gross State Product, over 11% of state revenues. Significant (100 million tpa) coal exports could add $1.2 billion to state output annually and 4,000 jobs. Cost increases biggest market challenge to coal industry in WY. Climate regulation biggest economic threat 111(d) could reduce coal production by over 50% in worst case and reduce employment by 9,000+ jobs despite positive gas effects. National state policy choices matter energy efficiency and wider state cooperation minimizes cost to Wyoming economy.

29