U.S. coal ‘capital’ shaken by federal land lease moratorium

GILLETTE, Wyo.—Like a trusty pickup truck, Gillette has bounced through tough times before and pulled through, thanks to coal.

Lately the bumps for an industry that’s brought wealth and jobs to this town are getting bigger—bankruptcies of major producers, pollution rules that have made burning coal more expensive and the decline of a once-promising export market.

Now, another threat has struck coal’s remaining U.S. stronghold: A potential end to relatively easy and cheap access to billions of tons of the fuel held in publicly-owned reserves across the West.

President Barack Obama’s administration has ordered a three-year moratorium on sales of federal coal reserves, and it’s putting a rare mood on folks in Gillette, a ranching-turned-energy town of 32,000: pessimism.

“Most of the time it comes back. This time, I don’t know,” said Bobbie Garcia, watching her daughter summit a two-story climbing structure at the town’s $53 million recreation centre largely built with coal money.

Until recently, the Powder River Basin of Wyoming and Montana remained a rare bright spot for the industry. Even as Appalachian mines shut down and cheap natural gas started crowding out coal as a power plant fuel, economies of scale kept the region rumbling.

Massive strip mines sprawled across tens of thousands of acres, much of it in the Thunder Basin National Grassland, produce roughly 40 per cent of the nation’s supply of the fuel.

For Gillette and other communities, that means more than 7,000 mining industry jobs. And not just fly-by-night, roughneck gigs, but the sort that sustain families year after year, pointed out Michael Von Flatern, a state senator who has lived in Gillette since the early 1970s.

“I cannot picture myself in Gillette without a coal mine,” Von Flatern said. “That’s a big part of it, the steadiness of it.”

Coal’s significance isn’t easily overlooked here. Mining equipment businesses, offering everything from generators to front-end loaders for rent or sale, line the southern approach into Gillette on Wyoming 59 like a vast aisle of life-sized toys for boys.

Parking fine collection boxes downtown proclaim Gillette the “Energy Capitol of the Nation.” Orange clouds of toxic gas released by mine blasting smudge the distant horizon.

Along with oil and gas revenues, coal has brought money for the state and local governments to build top-of-the-line schools and the rec centre, which features a 200-meter indoor track and an aquatic centre with a 3-meter diving platform.

Signs of economic troubles first appeared a few years ago, when drilling for natural gas trapped in water-saturated coal seams went bust. Thousands of wells were idled as companies shifted focus to fracking for gas in Texas and the Northeast.

Then last year, mining company Alpha Natural Resources filed for Chapter 11 bankruptcy. Industry giant Arch Coal Inc. followed in early January. Each company has two major mines in Wyoming. Arch’s Black Thunder mine ranks among the largest in the world.

Less than a week after the Arch bankruptcy came the Obama administration moratorium on new coal lease sales.

It targets an Interior Department program that’s been criticized for decades by members of Congress, for allowing mining companies to profit off a taxpayer-owned resource they lease for just pennies per ton through a largely uncompetitive bidding process.

The projects are on hold for three years while the Interior Department reviews the leasing program.

To locals already reeling from the coal bust, the moratorium was the final straw.

“All these rules and regulations just make it harder to conduct business,” said Susan Doop, owner of a local alternative therapy business. “Everything he (Obama) does to make it more costly to do business makes it harder. People are losing their jobs.”

Doop and her husband, Marlin, who owns an auto body shop, already are seeing the changes. He just spent three weeks focused exclusively on repairing a Ford Super Duty pickup truck from a coal mine that had a crushed cab and bent frame.

Analysts say the moratorium will add to the uncertainty in Gillette. At stake are the industry’s long-term prospects, and if it will be profitable to keep mining at current levels if costs increase after the review. It could apply to as many as 28 projects in nine states, although federal officials said they still were working out the full implications.

As it is, the coal companies themselves have been unwilling to lease any new coal in the Powder River Basin for the past three years, due largely to the uncertain market for the fuel.

“The damage has already done by current market conditions and a decision to regulate carbon dioxide,” said Robert Godby, who directs the Center For Energy Economics and Public Policy at the University of Wyoming.

The leasing moratorium, he said, represents “more nails in the coffin. I don’t want to say they’re already dead, but you get the idea.”

Matthew Brown reported from Billings, Mont.