The Wyoming Experiment: Promoting Coal Infrastructure Investments

Issue 7 and Volume 110.

By Steve Waddington, Executive Director, Wyoming Infrastructure Authority

The State of Wyoming has proven coal reserves of 68.7 billion short tons and leads the nation in annual coal production. Wyoming coal provides a means for the state economy to grow while contributing to America’s energy independence. To that end, Wyoming has embarked on an experimental effort to develop and promote coal-by-wire electric power transmission and advanced coal technology investments.

Wyoming’s coal market potential can be viewed in terms of a value chain. Today, most of the coal produced in Wyoming is shipped by rail to produce electricity in 35 states. In the future, gasification and liquefaction technologies will allow a number of coal-derived products to be produced in Wyoming. Unlocking this value-added use of Wyoming coal will require investing in transportation infrastructure – including transmission lines to move the electricity to market.

The Wyoming Infrastructure Authority was created to provide a catalyst for investment and development. The Authority plans, finances, owns and operates interstate transmission, and can also plan, develop and finance coal generation facilities that use emerging advanced technologies – such as coal gasification – to produce electricity. It can issue bonds to finance transmission and coal projects and can extend up to $1 billion in bond financing for projects owned by private sector participants. The Authority also has $10 million that it is deploying to prove the commercial feasibility of specific transmission lines and advanced coal facilities.

The Authority has completed its first project financing and embarked on feasibility studies for other transmission lines. We are also pursuing coal gasification technology on a commercial scale with a demonstration platform. Collaboration with other state authorities is underway.

Promoting Transmission Investment

Coal-fired generation combined with Wyoming’s world-class renewable wind generation potential offers a low-cost option for utilities throughout the west that are seeking to diversify their fuel mix away from increasing reliance on natural gas. Generating electricity from coal in Wyoming and shipping the product by wire will also add jobs and economic base for the state. The problem has been that utility transmission investments languish due to a variety of regulatory, financial and policy impediments and uncertainties. The Wyoming Infrastructure Authority is taking aim at changing this stagnant investment climate.

The Authority issued its first project financing with $34.5 million in bonds in September 2005. The issuance was a private placement with the Wyoming State Treasurer with the proceeds loaned to Basin Electric Cooperative to support construction of the Hughes Transmission Project in central Wyoming. Over the course of the 20-year term, issuance fees will provide the authority with a revenue stream of about $600,000. This financing has proven to be a win-win-win transaction for the state treasurer, Basin Electric and the authority.

The Authority is presently engaged in four projects to develop additional transmission capacity for Wyoming and neighboring states. It also plans projects to encourage public-private partnerships to demonstrate the commercial viability of advanced coal technologies including gasification with carbon sequestration. The Authority is also supporting regional efforts to attract FutureGen. The dozen proposals that have filed application for the project include a site near Gillette, Wy. If Wyoming is selected to host FutureGen, the authority’s role may include helping provide any necessary transmission upgrades, leasing the land to be committed to the project and marketing electricity produced by the plant.

In this case, it is likely the developer that goes first will face the most significant capital risk. Wyoming is known as a can-do state and is demonstrating its willingness to work aggressively to help solve these challenges by creating and funding the Wyoming Infrastructure Authority. In the coming months, we expect to demonstrate that these challenges can be overcome to the benefit of the state, the region and the country.