By Mike Hughlett
July 9, 2017 - The chimneys of Coal Creek Station, North Dakota’s largest power plant, tower 60 stories over the prairie. Nearby, an excavator that looks like a giant crane looms over a big coal mine.
The mine feeds the plant owned by Maple Grove-based Great River Energy, which churns out electricity for hundreds of thousands of Minnesotans. Four other coal mines dot the North Dakota countryside, mostly supplying neighboring power plants.
This “mine-to-mouth” model produces some of the cheapest power in the country and has enabled coal to remain an economic anchor in North Dakota, even as the industry crumbles in other parts of the United States.
Mines have actually been hiring in North Dakota in recent years, a sharp contrast to other coal regions. Utilities have been investing significant money in coal-powered plants.
“The coal industry has rolled back considerably from what it was 10 to 20 years ago, but we haven’t seen that in North Dakota,” said Dean Bangsund, an economist at North Dakota State University.
Still, the forces causing electricity producers to forsake coal nationally are creeping into the landscape. Wind power is surging, and it can be even cheaper than electricity produced from North Dakota’s coal-fired plants.
Great River Energy’s Jeff Wagner at the Coal Creek Station, North Dakota’s largest power plant. Behind him is one of the emission stacks. The plant uses approximately 22,000 tons of lignite per day from the Falkirk mine next door; the two operations work in tandem.
Great River has responded by retooling its Coal Creek plant so production can be more easily reduced when it’s windy. Other plants are doing the same, or looking at it. But the more they reduce production, the less coal they need — what could be a troubling prospect for the coal mines in the long-term future.
The state’s coal industry “isn’t immune to what’s occurring in the rest of the U.S., but it may be the last place where it hits,” Bangsund said.
While oil and its market gyrations are often in the headlines, coal has been a stable bedrock of North Dakota’s energy industry for decades.
Beneath North Dakota lies North America’s largest deposit of lignite. It’s a soft coal with less thermal energy and more water than higher-quality coal mined elsewhere in the United States. Shipping lignite by train or barge to far-flung power plants makes little economic sense.
But place a power plant amid a lignite deposit and the economics change drastically. From the mid-1960s to the mid-1980s, five big power plants were built in North Dakota, all near mines.
Coal fuels about 70 percent of the electricity generated in North Dakota, well above the national norm and Minnesota’s 39 percent rate. Yet Minnesota benefits from North Dakota’s supply.
“We’re exporting half of the power we produce, and Minnesota is by far our biggest market,” said Jason Bohrer, head of the Lignite Energy Council in Bismarck, a trade group for both coal mines and power plants.
Otter Tail Power and Minnkota Power — which serve more than 100,000 Minnesota residents — have ownership stakes in N.D. lignite-fired coal plants. Duluth-based Allete Corp. owns a lignite mine that supplies a nearby power plant, which in turn has an electricity supply agreement with Minnesota Power, Allete’s main subsidiary.
Great River has an even larger stake in North Dakota. A wholesale co-op, Great River sells electricity to 28 retail co-ops that span Minnesota and serve 685,000 customers. Coal Creek, with a 1,145 megawatt capacity, is by far Great River’s largest electricity generator; it has enough to power up to 700,000 homes. (A megawatt is a million watts).
The company has invested hundreds of millions of dollars at Coal Creek over the past decade, reducing emissions and increasing the plant’s efficiency.
Coal Creek’s fuel arrives by 36 conveyor belts stretching a little over a mile from the Falkirk mine, which is owned by Texas-based North American Coal Corp. The mine and plant have a symbiotic relationship. Managers from each even get together for weekly planning meetings.
The power plant employs 265, the mine 462; and both offer some of the state’s best-paying hourly jobs. Utility workers and coal miners in North Dakota make over $95,000 a year on average, according to data from the U.S. Bureau of Labor Statistics.
And in North Dakota, coal-mining employment actually rose from 943 in 2001 to 1,203 in 2015, before dipping by about 30 jobs last year, federal data show. Nationally, coal-mining jobs fell nearly 15 percent from 2001 through 2015, and they nose-dived further in 2016.
“Up here, everybody feels pretty safe, and it’s mainly because of the power plant,” said Perry Meske, who has worked at the Falkirk mine for 31 years.
Meske runs a 6,500-ton dragline, which looks like a giant crane but actually excavates dirt and rocks, exposing coal seams below. Bulldozers rip the coal, which is carried away in massive trucks as tall as a house. (The pit is reclaimed when the digging is done.)
The Coal Creek Power Station gets its coal from the Falkirk mine next door. Lignite coal fuels about 70 percent of the electricity generated in the state.
Meske and his co-workers at Falkirk are well aware of the coal industry’s precariousness outside of North Dakota. Federal mining inspectors at Falkirk — some of whom have relocated from dying coal regions — offer reminders.
“They’ve told me stories about how many places have closed up,” Meske said.
Outside North Dakota
U.S. coal production hit a low last year not seen since the late 1970s, federal data show. Coal’s downfall is largely driven by its major customer: electric utilities, which are increasingly switching to other power sources.
In 2016, the natural gas share of U.S. electricity generation was 33.8 percent, topping coal for the first time, according to the U.S. Energy Information Administration. Coal had a 30.4 percent share, down from 42.3 percent in 2011.
Another first occurred in 2017’s first quarter: Wind and solar accounted for 10 percent of U.S. energy generation.
“There are several factors behind the recent wave of retirements of coal plants, and No. 1 is that the competition’s costs have been cut, particularly natural gas,” said Jeff Phillips, a senior program manager at the Electric Power Research Institute.
In 2016, natural gas cost less than 20 percent of what it cost in 2008, though its price has ticked up a bit this year, Phillips said. The long-term supply of natural gas looks plentiful, partly due to shale oil and gas fields like those in North Dakota. That should keep a lid on gas prices.
Plus, natural gas-fired power plants emit about half as much greenhouse gasses as coal generators.
Growing environmental regulations have played a role in coal’s decline, Phillips said. Former President Barack Obama’s Clean Power Plan would force big cuts in carbon dioxide, a key greenhouse gas. The plan would hit coal-heavy North Dakota hard, and the state was one of two dozen to sue the federal government.
Nowadays, the Clean Power Plan is in judicial and political limbo. Yet the electricity industry has shown no signs of retreating from its move to gas and renewables. Even in North Dakota.
Awash in Wind Power
The state — indeed much of the Midwest — is awash in wind power.
North Dakota got nearly 18 percent of its electricity from wind in 2015, ranking it fifth among states nationally in wind’s share of the power market, according to the American Wind Energy Association. Minnesota was sixth at 17 percent, although it churns out more total wind power than North Dakota.
The power industry has taken advantage of the Midwest’s windy weather. Great River earlier this year unveiled a new power purchase agreement — from a large wind farm in North Dakota — that will increase its wind generation capacity by 65 percent.
Wind power, like solar energy, has been subsidized by federal government tax credits — a fact that North Dakota lignite producers are quick to point out. “We are getting squeezed more by heavily subsidized wind than natural gas,” said Bohrer of North Dakota’s Lignite Council.
Still, the costs for both wind and solar equipment continue to fall, and once a renewable power plant is built, the fuel is free of cost and carbon. “There’s not a lot you can’t love about wind,” said Great River Chief Executive David Saggau.
Yet wind is disrupting the economics of coal-fired power production.
The U.S. electricity generation market — coal, gas, nuclear and renewables — is largely coordinated by nonprofit regional power pools. The pools dispatch power daily via a computer algorithm based largely on the cost of energy; lowest-priced power gets used first. In the regional power pool covering Minnesota and North Dakota, that means wind energy.
“At these coal power plants, there are many hours when producing power is uneconomic,” Saggau said. “When the wind is blowing, we don’t need all the output from our coal plants.”
This spring, Great River took the rare step of closing a coal-fired power plant in Stanton, N.D. The small plant wasn’t adjacent to a lignite mine; it’s coal was hauled in from Montana. The economics no longer worked.
Saggau said Great River is “bullish” on Coal Creek Station. Indeed, the company has a coal supply contract with the Falkirk mine through 2045. Still, Great River late last year retrofitted Coal Creek so that its production could be ramped up or down relatively quickly, depending on wind-power supply.
The plant can now run as low as 30 percent capacity. “It’s a game changer,” Saggau said. “It’s the type of flexibility needed for plants to remain viable in this marketplace.”
This sort of flexibility would mostly be used during the shoulder seasons, not peak times in summer and winter.
The effect on coal demand could be significant. Currently, Great River gets 66 percent of its electricity generation from coal. With the plant’s new flexibility, reliance on coal could fall as low as 42 percent by 2032, according to a filing with Minnesota utilities regulators.
Those types of numbers concern the coal-mining companies, Bohrer said, because it could put the historical symbiosis between the mines and the plants at risk if the mines’ long-term profitability is threatened.
“The relationship between the plant and the mine only works when it benefits both of them,” Bohrer said.