Thursday, October 30, 2014

TVA's Colorado-Coal Connection

02/03/2014

Aspen/Snowmass/FlickrWhen folks think of Colorado’s black diamond runs, they may not have the state’s coal production in mind. The Elk Creek Mine is in western Colorado near the town of Somerset.

As I drove through Somerset, Colorado, for the first time, I couldn’t help but notice the coal mines. Chutes and conveyor belts arched over the state highway, depositing the rocks into enormous iridescent piles that towered over the road. Coal trains passed through multiple times a day, the horn blasts echoing up the canyons. Just outside town, a sign proclaims, “Somerset, a coal mining community since 1896.”

It’s not the scene most people conjure up when they think of Colorado. Here, in western Colorado, where the Rocky Mountains dip into the desert, trucks are just as likely to have a bumper sticker that says, “My electric car runs on Colorado coal” as one that advertises a ski resort. The Somerset area is home to three underground coal mines that, when fully operational, employ around 1,000 people, most of whom live in Delta County’s larger towns. Somerset’s 160 residents live in small, nearly identical homes that huddle beneath the coal silo in the North Fork of the Gunnison River’s narrow canyon. The one restaurant in town, which sold walleye, strudel and Navajo jewelry, just closed.

If Somerset feels more like an Appalachian coal community than one of the fancy ski towns only an hour and a half away, it’s not surprising: Its economy actually depends more on Appalachia than on Aspen. The Tennessee Valley Authority is one of the largest buyers of its coal. But that could change as TVA, the nation’s largest publicly owned utility, reduces the amount of electricity it generates from coal.

TVA began buying Western coal (mostly Wyoming, some Colorado) in the early 1990s when then-President George Bush amended the Clean Air Act to cut sulfur dioxide emissions from power plants. That sent utilities like TVA, which formerly bought a lot of coal from eastern Appalachian mines, looking to the West for lower-sulfur coal.

Pam Morris/FlickrCoal tipple at the Elk Creek Mine, which is located in Gunnison County, Colorado.Now, TVA is at a crossroads. Its coal plants are an average of 51 years old –  “which isn’t too old for a person, but it is for a power plant,” says Duncan Mansfield, a spokesman for TVA – and will need expensive upgrades to comply with new mercury regulations that come into effect in 2016. Plus, the Environmental Protection Agency has said it will soon regulate carbon dioxide emissions from existing power plants, making it even more expensive to keep burning coal.

But the most important factor may be the price of natural gas, which has dropped significantly in recent years and now rivals coal.

In response, TVA has decided to cut its coal-fired generation capacity, which was as high as 70% in the 1970s but now hovers around 40%. Under a new long-term plan, TVA will reduce that even further to about 20%.

TVA isn’t the only utility heading away from coal. NV Energy in Nevada announced last year it would quit coal entirely, and California utilities are selling their shares in coal plants to meet that state’s strict renewable energy portfolio standard. The trend is especially pronounced in the Southeast, which, more than anywhere else in the country, is ditching coal for natural gas and other sources of electricity.

That’s bad news for coal miners in Colorado, which have the longest haul to reach Southeastern markets. Unlike producers in Wyoming, which are already on the eastern side of the Continental Divide, coal trains near Somerset must wind their way west before doubling back and crossing the Rocky Mountains. It’s an expensive haul that adds to the price, says Bob Burnham, an independent coal industry analyst in Denver. As a result, TVA has said it will buy less Colorado coal going forward.

Now, people living in the North Fork Valley – home to Somerset, my hometown of Paonia and a handful of other towns with fewer than 3,000 people each – are worried about the future. Old-timers remember the last time the mines had a lot of lay-offs, in the 1980s when the oil crisis subsided. Miners’ families fled, businesses closed, school enrollment nose-dived and people bought houses for a few thousand dollars each. There was even a saying at the time: Happiness is Paonia in your rear-view mirror.

If the mines lose their TVA contract, as one already has, they can still shop their coal around on the open market. But it’s a hard time to be selling, says Burnham, because there’s already an over-supply.

John B. Kalla/Flickr Mountains outside Somerset. Some local people think the changing coal economy means western Colorado should start building on other assets.

These are uncertain times, and local people are starting to think about ways to diversify the economy to reduce our overall dependence on coal. There’s talk of bringing in high-speed broadband to attract more telecommuting workers or folks who get priced out of some of Colorado’s more expensive resort towns. One thing the North Fork Valley has going for it is natural beauty: soaring mountains to the east, desert to the west and fruit orchards, ranches and public lands all around. But as with many major economic transitions, even those in a place with great natural amenities, it’s best not to bank on any one solution.