Get Big Pivots

Colorado legislators said coal communities should be helped in the energy transition. This agreement with Craig and Moffat County provides a picture of what that looks like in practice.

 

Story/photos Allen Best

No other place in Colorado may be so dependent upon one company, one industry, as Craig and Moffat County.

Snow matters greatly to Aspen and Vail and the other ski towns who are linked at the hip, sometimes uncomfortably, with the big ski companies who sell the thrill of sliding downhill. But summer tourism, less dependent on uphill conveyance, has been coming on for decades. In Crested Butte, summer surpassed winter in the 1990s. Second-home development itself is a major economic sector, skiing just one of the amenities. Sales tax figures between a good snow year and a bad year vary relatively little.

In Craig, the mining and burning of coal has delivered the community a paycheck for nearly a half-century. The coal plant and the two primary coal mines that deliver fuel to the plant generate 43% of the total property taxes paid to Moffat County and various school, fire, and other districts this year. The 437 jobs in this smaller community that are being lost are, according to one analysis, the equivalent of 141,000 jobs in metropolitan Denver-Aurora.

Now, with the last coal-burning units to close down by 2028, a settlement agreement has been reached that some call a landmark. Tri-State Generation and Transmission Association, the operator and primary owner of the three coal-burning units at Craig Generation Station and Colowyo, one of the two coal mines that supply it, has agreed to pay the local community up to $73 million in payments beginning in 2026.

In addition, Tri-State has also agreed to give Moffat County augmentation water rights with a value estimated by Moffat County at $2 million to $3 million.

This agreement has been submitted to the Colorado Public Utilities Commission which can amend it, even reject it. If the past is precedent, the PUC commissioners are likely to approve it with little change.

Local officials involved in the negotiating say that it won’t make their community economically whole, but it will help them as they try to figure out how to rebuild their economy. One hope is that a revitalized rail service authorized by state legislators this year from Denver to Craig may interest manufacturers or create a stronger, safer connection to the Steamboat resort economy. Others have suggested that expanding tourism amenities can soften the departure of coal; others stoutly reject the idea of becoming “sheet changers.”

The Tri-State settlement agreement also applies to the broader electric resource plan being reviewed by the PUC. It has several major provisions:

  • Addition of 940 megawatts of renewable generation and 310 megawatts of battery storage to its generating capacity in its territory.
  • Retirement of Craig Unit 3, previously scheduled for 2030, by Jan. 1, 2028.
  • Solicitation of 290 megawatts of dispatchable combined-cycle gas plant, with first preference in Moffat County but somewhere in western Colorado or southwestern Wyoming if the bids for a Craig-area plant aren’t competitive.
  • Retirement of a coal-burning unit in eastern Arizona called Springerville 3 that was commissioned in 2006. That unit is to be closed by September 15, 2031, leaving Tri-State with ownership in just one coal-burning unit at the Laramie River Station in Wyoming.

Tri-State expects to achieve an 89% reduction in greenhouse gas emissions by 2030 as compared to 2005 levels.

Important in Tri-State’s pivot from coal in Colorado and Arizona is whether Tri-State gets federal aid. The Inflation Reduction Act of 2022 carved out $9.7 billion to assist electrical providers in rural America with stranded assets. Individual G&Ts can apply for up to 10% of the total amount in the New ERA program. That means that Tri-State may have applied for up to $970 million. Tri-State has not disclosed publicly how much it has applied for. The agreement, however, is not dependent upon whether Tri-State gets federal money. It will be needed, though, given the existing debt on the coal infrastructure.

Matt Gearhart, an attorney representing the Sierra Club in the proceeding, noted the importance of the New ERA funding in allowing utilities to think about retiring even relatively new coal-fired plants. Springerville came on line in 2006.

He also noted that the major natural gas plant in Craig is not a given. Whether that makes sense beyond providing local tax base and jobs is a discussion for a later day.

The PUC will take testimony Tuesday, July 9, at the Moffat County High School auditorium in Craig from 3 to 7 p.m. and then virtually on Thursday, July 11, from 4 to 7 p.m.

The settlement agreement can be found in the PUC files; it’s proceeding number 23A-0585E.

The three units of Craig Station were constructed from 1974 to 1984.

Coal is abundant in northwest Colorado. That’s why Public Service Co., now a subsidiary of Xcel Energy, in the 1960s built a coal plant near Hayden, 15 miles to the east of Craig and far distant from most of the utility’s consumers in metro Denver and elsewhere in the state.

Construction of the coal-burning units at Craig were started in 1974, a time when demand for electricity was soaring and utilities had learned how to build ever-bigger coal plants. Coal-plant construction was also induced by the expectation that oil shale in the nearby Piceance Basin would drive demand for greater amounts of electricity. That demand did not materialize, and in the late 1980s the utility, Colorado Ute, was forced into bankruptcy. Tri-State and other utilities picked up the pieces.

Tri-State owns the third unit outright but is a minority owner in the first two units. Other owners are Arizona-based Salt River Project (29%), the Oregon-based PacifiCorp (19.28%), Fort Collins-based Platte River Power Authority (18%), and Public Service Co., a.k.a. Xcel Energy (9.2%).

In 1979, during the construction years, I was in Craig briefly to work on local newspapers but returned rarely until 2015.

New EPA regulations governing pollutants had dampened the prospects of coal. WildEarth Guardians had launched an anti-coal campaign. Among its supporters was New Belgium, the brewery in Fort Collins.

I arrived on a September Sunday to conduct interviews. Later, out of curiosity, I wandered into a liquor store just before a Denver Broncos game. Beer was moving by the case, but none were Fat Tire or other New Belgium brews. They had become brews non grata in Craig, a place where coal was akin to religion.

Coal It Keeps Our LIghts On

In September 2015, Craig was feeling under siege as enforcement of federal regulations began drawing a smaller circle around emissions from the three coal-fired electrical generating units.

But while locals virtuously posted signs that said “Coal: It Keeps Our Lights On,” renewables were increasingly doing so, too, and with rapidly declining prices.

In April 2018, Tri-State brought on board a new chief executive, Duane Highley, with a clear mission to begin the pivot. In January 2020, in a ceremony at the Colorado Capitol, Highley announced that Tri-State planned to shut down the last of the coal units at Craig by 2030.

If the writing had been on the wall, there was still disbelief among many. That was evident in a March 2020 session at the high school in Craig. Anger was evident in remarks made to state representatives, but the more common thread was disbelief. What would replace the jobs, the tax base? And why was this necessary?

Among those listening that night and in a session the following day at Northwest Colorado Community College was Wade Buchanan. That week he had started as the first administrator of Colorado’s new Office of Just Transition. The department had been created by state legislators the previous spring. At that time, he had no staff and not much budget.

While adopting sweeping legislation to accelerate Colorado’s response to climate change, state legislators in 2019 had made it clear that coal-dependent communities were to be given a helping hand as Colorado made the necessary pivot from coal because of the climate and health impacts of burning coal.

The just transition law, HB19-13140, said this: “Colorado must ensure that the clean energy economy fulfills a moral

commitment to assist the workers and communities that have powered Colorado for generations, as well as the disproportionately impacted communities who have borne the costs of coal power pollution for decades, and to thereby support a just and inclusive transition.”

What exactly that means in practice for Craig, though, was not spelled out. Other legislation more precisely laid out the expectations of Xcel Energy for its remaining coal communities. Legislators clearly thought that Xcel Energy, the state’s largest utility, and its customers needed to help out the Pueblo and Hayden communities, where coal plants will be retired, and at Brush, where the coal plant will be converted to burn natural gas.

Tri-State, if the state’s second largest electrical generator, has a different business model. It’s an electrical cooperative that was formed by its member cooperatives to deliver power. It has no overt profit motive.

Coal for the Craig units comes principally from two coal mines in Moffat County.

Tri-State insisted, even days prior to the settlement agreement, that it was not required by state law to submit a community assistance plan or a workforce transition plan. It further pointed out that, unlike Xcel Energy, its member cooperatives “serve some of the most economically disadvantaged rural consumers in the West, many of whom reside outside of Colorado.” Indeed, Tri-State has members in four states, including Arizona, Wyoming and Nebraska.

However, even in 2022, Tri-State had agreed in a prior settlement to participate in planning that would provide community assistance.

Discussions about what that would look like became more vigorously discussed in monthly meetings facilitated by the Great Plains Institute that were held in Craig beginning in June 2023.

Tri-State’s first proposal was for community improvement projects, such as a new swimming pool.

Craig Mayor Craig Nichols says that after considering the offer, the local leaders quickly decided that wasn’t the best option.

“Once they closed the local plants and were gone, how would we continue to pay for those things?” says Nichols. “So we switched our No. 1 priority to the payments into a perpetual trust for the community.”

Joseph Pereira, the deputy director of the Office of Utility Consumer Advocate, the state agency charged with looking after the interests of consumers in utility matters, entered key arguments.

“This is an issue of fundamental fairness,” said Pereira in a May filing. “It would be fundamentally unfair to treat coal communities differently dependent upon what type of utility (investor owned or cooperative) generated energy. Moreover, it is difficult to conceive the intent of the legislature was to ensure a community like Pueblo, served by PSCo (Xcel), should be provided community assistance, but Craig is left to fend for itself.”

Buchanan, in his filing on behalf of the Office of Just Transition, painted a dark picture.

“Craig and Moffat County face a near-existential threat by the end of this decade. When a handful of entities that generate 43% of the property taxes in a community go out of business at the same time, it signals the potential for a broad, deep, and long-lasting – perhaps even permanent – decline in economic activity and opportunities from which no community can quickly or easily recover.”

Jennifer Holloway in 2020 at Mt. Harris memorial mine disaster of 1942

Jennifer Holloway, the executive director of the Craig & Moffat County Chamber of Commerce, points to a memorial at the one-time mining coal mining camp of Mt. Harris where her grandfather lost his life in 1942. Mt. Harris lies about 25 miles east of Craig. Mining no longer occurs there. 

In his testimony, Buchanan compared Craig and Moffat County with other places in Colorado. The property tax hit is probably twice that of local jurisdictions where the Comanche and Pawnee coal plants are located in Pueblo and Morgan counties, and 2.9 times that of the coal plant at Hayden, in Routt County.

The job loss was also outsized compared to the other locations: 5.1 times the percentage loss in nearby Routt County, 16.8 times the expected percentage loss in Morgan County and 33.7 times the expected percentage loss in Pueblo County.

“Those three will also warrant sizable community and worker assistance commitments by Xcel Energy, the primary owner and operator of the coal plants,” Buchanan said in his testimony. “But none of the impacts in these counties will come close to those faced by Moffat County.”

Since it created the Office of Just Transition with a skimpy budget, legislators have allocated $35 million to the office and its efforts. Buchanan estimated that more than $17 million of that money will be awarded to Yampa Valley communities, mostly in Craig and Moffat County, in grants or to assist in what are called pre-closure strategies for potentially dislocated workers and their families. Somebody with the very unusual job description of “transition navigator” has been hired to help workers figure out their futures.

One grant of $40,000 went to Moffat County and Craig to develop infrastructure in the Yampa River to attract outdoor-based tourism.

Another $150,000 was given Moffat County to fund a socio-economic study to assess the impacts of a proposed pumped-storage hydro power project that could create 300 construction jobs and 30 high-paying permanent jobs — and also generate property tax.

Still another grant of $50,000 was given to help Moffat County retain independent legal counsel. In PUC proceedings, Denver and Boulder routinely enter filings in cases they deem important to their interests. Pueblo does, too. But this was something of foreign terrain for the northwest Colorado communities.

The settlement “is a big deal,” said Buchanan when I talked with him after the settlement agreement had been filed. He identified what he saw as several key elements.

One, he and his staff found their footing. “We realized that from the state’s perspective, that if we were going to do our job, we first and foremost had to be an effective partner with the affected communities. No coming and telling them what to do or how to do it or that we had the answers for the challenges they were facing,” he said.

The message was that “we are here to stand with you in this transition.“

That’s why the money was allocated for an outside attorney, to give the local communities an opportunity to have a voice.

The Office of Just Transition plans to make the same offer for Hayden and Routt County, he said.

Part of it was the stakeholder process facilitated by the Great Plains Institute.

A second key element was that Tri-State, despite its legal protestations of exemption from requirements, decided to step up. “The commitment they made in that settlement agreement is pretty significant.” It will “greatly empower the communities to have the resources to drive their own transition in the future.”

Third is that these communities have evolved in their thinking. The transition remains a huge challenge, and for the most part, “they don’t like the idea” of making this change. But they have “resolved to do what they can to take control of the transition they are a part of. That’s a very important thing.”

In summary, “we found our footing about how to do our work, Tri-State stepped up to the plate, and Craig

and Moffat County found their voice in the process.”

Buchanan recommended that the PUC require Tri-State to provide $118 million in community assistance. How should the settlement of $73 million be seen? One individual involved in the case, talking only for background, said that it reflects the normal negotiating process. You ask for high and accept something less.

Nichols, the mayor of the city of 9,000 people, praised Tri-State for doing “more than they had to do. They had to do nothing. It really set the bar for future transitions.”

“This shows what the actual cost of decarbonization looks like,” he added.

Randy Looper, Elk Run Inn

Randy Looper, now a city council member, at the Elk Run Inn  that he operated in 2020.

Randy Looper, a city council member and retired hotelier, said he doesn’t expect overnight transformation but he expects Craig can achieve a more diversified economy.

Looper especially likes the structure of the aid. Moffat County and Craig are to get $22 million in direct payments from 2026 to 2029. The money is to be used at their discretion.

From 2028 to 2038, Tri-State has agreed to provide up to $48 million more. But the agreement also specifies that this can be reduced if Tri-State reinvests in Craig and Moffat County. If Tri-State builds a natural gas plant that pays $2 million in property taxes, that can be deducted from the $7 million that Tri-State would ordinarily pay the city and county.

“They have incentive to build new things in Moffat County,” Looper said. “It’s a win-win for Craig and Moffat County.”

I met Looper maybe 10 years ago on a visit to Craig. He himself had left a job in banking in downtown Denver many years before, first to run a motel in Iowa until, becoming weary of the muggy summers, relocated to Craig. The older motel that they operated in Craig was wonderfully esoteric. His wife had advised wildlife themes for each room, and this went far beyond hanging photos or other art. Even toilet fixtures managed to have that unit’s theme. I stayed in the sheep, elk, and antelope rooms– and many more — but not the rattlesnake room. I wouldn’t have slept well.

In March 2020 I was there for the mildly stormy meeting at the high school. Two days later, Gov. Jared Polis arrived in Craig and toured a boating store. It was just Polis and the two store owners – and me. That afternoon, he was at the Hayden Town Hall to hear testimony. Sometime that afternoon, word was sent out that Colorado had its first confirmed case of Covid-19.

That summer, instead of sinking real estate prices, Craig’s market actually gained. People were ready to leave behind the cities, whether in Colorado or Utah or wherever, for more rural living, if they could. Today, Craig hasn’t gained population, but neither has it lost any, said Looper. That has occurred even as the employment at the coal plant has dropped significantly, from about 300 to about 110.

Jared Polis in Craig, March 2020

Colorado Gov. Jared Polis stopped by a store in Craig devoted to boating gear prior to a meeting about coal closures in early March 2020.

 

The larger question is what exactly does this agreement represent and how may it influence other cases in Colorado? Xcel even now is readying an application for a just transition electric resource plan that will speak to how it can help Pueblo, Hayden, and Morgan County as the coal plants close or, in the case of the latter, get converted to natural gas. The application is due Aug. 1.

No doubt, this settlement agreement will in some way influence the other cases in Colorado. How could it not.? (And to be fair, some of Xcel’s agreements to Pueblo influenced this settlement).

“I don’t want to speculate about how this one will inform other commitments, but I’m pretty sure it will,” Buchanan told me.

A still larger question is how do we see this component of just transition in the broader conversation of this energy transition?

The coal communities thought they were doing good, meaningful work — and work that happened to pay well. Not like the high-tech jobs in Boulder or Denver, but good enough for a solid living. Craig is not a place of extremes in wealth. It’s solidly working class, middle class. Big pickups, sure, but not enormous houses.

Inevitably, when your job is digging and burning coal, your identity gets tied up in those duties. Then, to be told that what you’re doing is somehow wrong? That would be hard to reconcile.

True, even in the 1950s and 1960s, we had very strong, very firm evidence that putting carbon dioxide into the atmosphere was a very risky endeavor. A book I recently read, “Fire Weather: A True Story from a Hotter World,” makes that even more clear than I had previously understood. But as a society, we had not made that decision.

In the absence of other technologies, electricity generated by combustion of coal made our lives easier.

Now, at least in Colorado, and to a large degree in the United States and the world, we have concluded we must change directions. How, as the legislators put it, do we achieve a just transition, not leaving the coal communities behind?

Buchanan, in his filings and in our conversation, repeatedly emphasized the enormity of change for fossil fuel communities. “They served our economy well, and now they are being asked to do something that is extraordinarily difficult and potentially quite painful.”

What Colorado is trying to do is make this transition a little less painful. Pereira, at the Office of Utility Consumer Advocate, emphasized the social contract between energy communities and the broader society.

“If you create bogeymen out of communities, you’re undercutting the ultimate goal you are trying to achieve. We are not trying to decarbonize for the sake of climate. We are trying to decarbonize for social reasons, so we have a better place to live. If you are not including the social aspect of taking care of the communities, you are undercutting your overall goals.”

Downtown Craig has freshened up but has lost business to the chain retailers on the city’s edge.

This particular case was more difficult because there was no defined policy solution in regulations.

“The Legislature defined what it wanted for investor-owned utilities. This was unique because it required purely novel arguments. So there was new advocacy by our office, these novel arguments, to come to a position that worked for them.”

To get there required strong community advocacy, which Craig and Moffat County delivered.

The result was a very rare outcome over public policy. It was not a matter of somebody wins, somebody loses. “You know how rare that is in policy making?” he said.

How much of this applies to Pueblo? There, an advocacy group aligned with Xcel has made the case that Xcel should build a nuclear power plant to replace the lost jobs and revenue from Comanche Generating Station. That argument is hard to accept divorced from the reality of the current cost of nuclear technology. We’ll see where this lands.

As the mayor of Craig mentioned, there is a cost to the decarbonization. True, renewables are coming in cheaper, but there is a cost. Every utility manager recites “cost and reliability” morning, noon, and night. So what do we make of the cost here? Tri-State will spread its costs among its members, as will Xcel among its customers.

Among the parties to the settlement agreement was a member cooperative based in Holyoke called Highline Electric. Dennis Herman, the general manager, did not speak to the assistance to Craig and Moffat County, but he did testify in a press release that Tri-State’s plans will add significant renewable resources while demonstrating how to deliver reliable power to its members, even in extreme events.

Less than 20 years ago I traveled to Holyoke for a story about why the farmers there supported another Tri-State coal plant in Kansas. There, in the land of center pivots, they’ve made a big pivot in their thinking, as has Tri-State altogether and Colorado altogether.

Allen Best
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