Local coal industry to take hit as IPP converts to gas
Owners say because of regulations, costs, plant must change to stay in business
Suzanne Dean
Publisher
6-8-2017
DELTA—The Intermountain Power Project (IPP), one of the largest power plants in the United States, will covert from coal to natural gas by 2025, a change expected to have a huge impact on the Central Utah coal industry.
IPP, which is owned by 23 Utah cities and six Utah rural electric cooperatives, consumes 30 percent of the coal mined in the state.
The plant is the largest customer of the SUFCO Mine outside Salina and a large purchaser of coal extracted from the Skyline Mine in Emery County. Both mines employ dozens of Sanpete County residents.
The mines are major supporters of rail and trucking operations. One of the main activities of Barney Trucking and Robinson Transport, large regional employers, is taking double-trailer loads of coal from SUFCO to IPP.
“We have eight years to prepare for conversion to natural gas,” says Ted Olson of Ephraim, chairman of the board of the Intermountain Power Agency (IPA), the alliance of the 29 Utah cities and electric cooperatives. “In 2025, we’ll flip the switch, we’ll turn off the coal and turn on the gas.”
The switch is not necessarily a happy choice, Olson says. But quite a few years ago, IPA saw the writing on the wall and realized to stay in business, it had to back away from coal.
“We are saddened to announce this decision, but factors beyond our control make continued operation of the coal units unfeasible after current power purchase agreements expire,” Olsen says.
The plant is owned by Utah public utilities, and generally, those utilities have a right to get power from IPP whenever they want.
Most of the Utah operations, including the four Sanpete County participants in IPP and IPA—Fairview, Mt. Pleasant, Spring City and Ephraim—view IPP as a reserve source they will tap in the future as their power needs increase. They aren’t drawing on IPP right now.
Consequently, for most of the 30 years IPP has been in operation, it has sold 90 to 100 percent of its power to six large cities in Southern California—Los Angeles (owner of the largest public power operation in the United States), Anaheim, Burbank, Glendale, Pasadena and Riverside.
One of the factors forcing the switch from coal to gas is legislation passed about three years ago by the California State Legislature barring utilities from selling power produced from coal after current power-purchase contracts expire.
Meanwhile, the EPA has issued regulations requiring states to submit plans describing how they will reduce total carbon emissions in their states. The Utah plan says that one of the probable strategies in our state will be cessation of coal use at IPP.
But possibly a bigger factor is economics. It is becoming cheaper to generate power using natural gas and renewable sources such as wind and power than it is to burn coal.
In 1987, when IPP started delivering power, the United States was not a huge natural gas producer. In recent years, natural gas production has soared. President Donald Trump’s revival of the Keystone Pipeline means more natural gas flowing in from Canada.
“Natural gas is plentiful, and the price has stayed down for quite some time,” Olson says.
When IPP started, the California public utilities signed contracts to buy power from the plant for 40 years. Those contracts ran until 2027.
A few years ago, with the regulatory environment and costs of various energy sources changing, IPA decided to try to renew the contracts early.
As of Jan. 15, 2017, five of the six California companies have renewed. One city, Anaheim, decided to drop its relationship with IPP.
Likewise, 27 of the 29 Utah cities and rural electric cooperatives have renewed agreements under which they own certain shares of the electricity generated and can “call back” the power they own, at any time, at wholesale prices. (Monroe, in Sevier County, and Meadow, in Millard County, dropped out.)
So how does the Utah coal industry, and related industries, respond to such a big change?
“They’ve got to find other markets,” Olson says. “China and India are still building coal-fired plants.”
