Coal’s black cloud has a silver lining for the arid American west

The transition from coal power to natural gas and renewables in the West is picking up steam. That shift has important implications for carbon mitigation, but it also has produced an often overlooked yet suddenly significant development: the release of water previously needed for cooling coal-fired power plants for other uses.

Access to water, in large part supervised by the federal government’s Bureau of Land Management, is perhaps the major issue in the arid West. Unlike in the water-abundant East, where property owners are free to draw at will from streams, rivers, and lakes, in the West, water is allocated under a prior appropriation doctrine, which assigns water rights to people located upstream, provided it is taken for “beneficial use.” Conflict is inevitable without well-functioning markets for water rights.

As coal plants across the West, from Arizona to Oregon and Washington, continue to close as a result of competition from cheap natural gas and subsidies for solar and wind power, small towns like Craig, Colorado, located on the western slope of the Rockies with nearly 9,000 residents, hundreds of whom work in the coal industry, will have the option of buying the coal plant’s water rights when it is mothballed in 2030.

Craig’s local economy can be transformed by the availability of new water supplies. The same possibility is opening in many other cities and towns throughout the West. The transformation is underway at a time when water conservation is an unusually high priority because years of drought have left rivers, lakes, and reservoirs alarmingly low. Cooling a coal plant uses huge amounts of water. The one in Craig consumes an average 16,000 acre-feet of water every year, sucking up water that could supply as many as 32,000 households.

The bad news from coal’s demise is that thousands more coal industry workers nationwide will lose their jobs. (Industry employment is down by roughly 100,000 since the late 1980s). The good news is that once the last western coal plant is closed, more water will be available for residential and recreational use as well as for ranching and farming.

Power companies have cut their use of coal drastically, shutting down plants or converting them to natural gas. One reason for coal’s demise is rising public concern over climate change. The carbon content of natural gas is half that of coal.

A more important reason is found in market forces: the fracking revolution has made natural gas much cheaper than coal, supplying strong incentives for power plants to switch to gas-fired turbines. The substitution of gas for coal has been dramatic: natural gas nowadays is the nation’s leading fuel for electricity generation.

The Energy Information Administration says that additional supplies of natural gas will be needed to meet the nation’s ever-growing demand for electricity. Since 2005, when the shale revolution caught fire, gas consumption has soared. Moreover, natural gas is an indispensable backup for solar and wind power: gas-fired turbines can ramp up quickly 24/7 to generate electricity when the sun and wind are offline. In fact, fracking for natural gas opened the way for the growth of solar and wind power, and it has reduced U.S. carbon emissions to mid-1990s levels, the fastest and sharpest decline anywhere in the world.

Despite fracking’s considerable economic and environmental value, several politicians want to ban it. Joe Biden, who sees the writing on the wall for coal, is moving in a different direction. Biden opposes a fracking ban but wants to stop new oil and gas drilling on federal lands. Most oil and gas drilling takes place on private and state lands. 

What’s important to recognize is that in arid West energy production and water are intertwined with many local economies. Water is a precious commodity. Where it flows — whether to a residential tap, a power plant, or down a river for recreational use — and how it will be reallocated after coal goes the way of the dinosaur will say a lot about the future of the American West.

William F. Shughart II, research director of the Independent Institute, is J. Fish Smith Professor in Public Choice at Utah State University’s Huntsman School of Business.