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Montana Coal, Part 1
The Trouble with Montana Coal: Obstacles to Development
In the seemingly mad dash to build new coal-fired power plants and develop new coal mines, one often hears quotes like: “Montana is the Saudi Arabia of coal,” or “Montana has the largest coal reserves in the country.” While both statements could be considered true, it’s not as if coal in Montana is a new discovery. The extent of Montana’s coal reserves has been known for decades.
So what’s the problem? Why hasn’t Montana taken advantage of this resource? Why have other states—Wyoming for example—developed their coal reserves while Montana hasn’t?
The answer to these questions is, as you might expect, not straightforward. Some in Montana seem to think they can simply wish new coal mines into existence. But, as is usually the case, whether large new coal mines will be developed in Montana boils down to economics. The reality is that while Montana has the largest coal reserves in the country, much of that coal simply costs too much to mine and transport.
The economic problems of Montana coal stem from two factors: geography and geology. Geography is the easy one. One need only look at a map to see that Montana is located farther from the major coal-consuming markets (the upper-Midwest, Texas, the rust belt states, and others) than other suppliers of coal. Shipping rates for coal via rail are about a penny per ton per mile. That may not sound like much until you do the math. A utility may buy 2,000,000 tons of coal per year and ship it nearly 2,000 miles. Saving a few miles of shipping can have a huge impact on the delivered price of coal.
Exacerbating the distance disadvantage of Montana coal is the fact that only one railroad company serves Montana. As long as Burlington Northern Santa Fe holds a monopoly, rates will remain high (just ask any Hi-Line farmer trying to ship grain). Other coal producing regions of the country don’t suffer from this disadvantage.
Geologically speaking, Montana coal suffers as well. There are many factors that make it more expensive to mine coal in Montana then in other states, particularly Wyoming. There is, on average, more overburden on top of coal in Montana. Once the overburden is removed, the coal seams aren’t as thick.
Another problem that plagues Montana coal, particularly in the Tongue River Basin, is sodium. Some Montana coal contains elevated levels of sodium. This makes it less desirable to burn at power plants, not because of emissions, but because of the sodium residue left behind in the boilers. The ironic thing for Montana is that the same Tongue River coal that is touted as being the cleanest (especially in terms of sulfur) for air emissions is the same coal that contains an over-abundance of sodium.
Despite all of these problems, Montana has been able to establish a relatively modest, but stable, coal industry that has survived for a number of years. For the most part, Montana’s coal mines were permitted in the early 1980s. At that time, utilities were agreeing to long-term supply contracts that made financing of the mines easier. The biggest of these mines, Western Energy’s Rosebud mine, was opened to feed the Colstrip power plants.
Since those long-term contracts have expired, Montana’s coal mines have done a remarkable job of reducing their costs of production and staying competitive with other states. The price of coal will not support, however, the massive capital investment needed today to open new mines and build new infrastructure in Montana.
For the time being, then, Montana should be content with its modest, but stable, coal industry. For many years now Montana mines have extracted between 35 and 40 million tons of coal annually. That number doesn’t look likely to change in the near future.
So the next time you hear someone touting the extent of Montana’s coal reserves, you’ll know why nothing is likely to happen with them. MEIC hopes that Montana’s coal reserves are never needed and that the country finds better, cleaner, and more sustainable alternatives for the future.