Wyoming’s Energy Transformation: Insights from Federal Engagement with Coal Communities

Wyoming is heavily dependent on the extraction of fossil fuels, particularly coal, to support its economy. As the United States seeks to reduce greenhouse gas emissions, the federal government has begun to implement policies designed to support fossil fuel–dependent “energy communities.” This report, based on interviews with experts and policymakers at the local, state, and federal levels, examines whether—and to what extent—current federal policies are supporting Wyoming’s goals of an energy transformation to achieve net-zero greenhouse gas emissions.

Our interviews and analysis suggest that current federal efforts, while helpful, could do more to boost Wyoming’s communities during the energy transition. A leading cause is the lack of capacity among local and state officials to access the considerable array of federal resources made available through recent legislation. This lack of access has hindered Wyoming’s strategy of developing new technologies that take advantage of the state’s coal resources but avoid the associated emissions. However, some federal efforts, particularly the federal Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization (the “Energy Communities IWG”) and its Wyoming Rapid Response Team (RRT) appear promising and can offer lessons for policymakers seeking to support fossil fuel–dependent communities across the country. In particular, the community-focused approach of the RRT, which emphasizes relationship building, strengthening local governance capacity, and flexibility in program design, can create the conditions that lead to progress in the energy transformation. This progress is particularly notable in Wyoming, where fossil fuels have dominated state economics, culture, and politics for decades.

Our main findings are as follows:

• Wyoming is pursuing a strategy of energy transformation that seeks to continue coal use while developing new technologies that avoid greenhouse gas emissions.
• The federal IWG, and particularly the Wyoming RRT, has provided useful resources and offers a model for success in place-based policymaking and implementation.
• Despite the support of the IWG, many local stakeholders still lack the capacity to access complex federal funding opportunities.

Wyoming is by far the United States’ largest producer of coal and a significant producer of oil and natural gas, making it the state most dependent on fossil fuel production by a variety of measures (EIA 2014; Raimi et al. 2023). But the imperative to rapidly reduce greenhouse gas emissions raises major questions about the future of the state’s economy. In recent years, local, state, and federal actors have taken a variety of steps to make Wyoming more resilient to changes in the national and global energy system.

This report, based primarily on interviews with local, state, and federal policymakers and other experts, seeks to understand Wyoming’s strategy for navigating the future as energy markets shift toward net-zero emissions. It also seeks to derive lessons from nascent federal efforts to support Wyoming’s coal-producing communities and the state’s economy more broadly. We begin by describing the role that fossil fuels, particularly coal, play in the state economy, with a focus on the Powder River Basin region. We then briefly describes our research methodology (Section 2) before turning to findings and policy implications (Section 3) followed by a brief conclusion (Section 4).

Contribution of Fossil Fuel Extraction to Wyoming’s Economy

Ironically, Wyoming’s coal boom was largely a product of federal environmental policy. The Clean Air Act of 1970 and its subsequent amendments sought to reduce sulfur dioxide emissions from coal-burning power plants, dramatically boosting demand for Wyoming’s low-sulfur coal (Godby et al. 2015). Figure 1 illustrates how the state went from a negligible coal producer before the Clean Air Act to the nation’s dominant coal producer in the 1990s.

Wyoming has experienced major economic benefits from the exploitation of its coal and other fossil fuel resources. The state’s Permanent Wyoming Mineral Trust Fund (effectively a sovereign wealth fund) has been capitalized with revenues from coal, oil, and gas production and stood at more than $11 billion as of July 2024 (Wyoming State Treasurer’s Office 2024). Coal revenues have also provided most of the funding for school construction and maintenance in the state over the past few decades (McFarland 2022).

Thanks to revenues from fossil fuel production, citizens of Wyoming have become accustomed to a very low tax burden. One recent analysis estimated that a hypothetical Wyoming family of three in a modest home uses roughly $28,000 worth of public services per year while paying just $3,770 in taxes, with most of the difference provided by coal, oil, and gas revenues (Wyoming Taxpayers Association 2024). This dynamic helps entrench support for extractive industries in the state and, because of the political challenges of raising new taxes, creates strong incentives for policymakers to continue fossil fuel production as long as possible.

But coal revenues have declined substantially in recent years and are projected to fall further. Severance tax revenue from coal production dropped from more than $290 million in 2011 and 2012 to $172 million in 2022 and is projected to decline to $114 million by 2028. Coal leasing bonuses, which are paid to the state when developers secure federally owned lands for production in Wyoming, have fallen from more than $200 million in some years to zero, with no new revenues projected in the coming years (Consensus Revenue Estimating Group 2024). Figure 2 illustrates these trends alongside historical and projected coal production.

Along with the risk of declining revenues, job losses in the coal industry would have a major effect in the Powder River Basin. Although coal mining in Wyoming directly employs just 4,400 people as of August 2024 (1.5 percent of state nonfarm employment), many of these jobs pay more than $100,000 annually, almost twice the state average (FRED 2024a, 2024b; BLS 2024).

The decline of coal has been largely driven by competition from alternative sources, particularly the rise of low-cost shale gas and, in recent years, renewables (Coglianese et al. 2020; EIA 2023b). With coal demand projected to decrease further (EIA 2023a; International Energy Agency 2023) and with proposed Environmental Protection Agency regulations potentially accelerating this trend (US EPA 2023), the outlook for coal is bleak. However, as we discuss in Section 3, the potential for alternative uses of coal, along with carbon capture, utilization, and storage technologies, creates an opportunity that Wyoming policymakers are pursuing in earnest.

This analysis is based on a combination of key stakeholder interviews and complementary sources. Background information is derived primarily from literature reviews, news reports, and relevant data. Our findings are based primarily on semistructured (mostly in-person) interviews with 22 key stakeholders involved in Wyoming’s economic transformation efforts, falling into three categories:

• Wyoming stakeholders working on energy transformation at the state and local levels;
• federal staff of the Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization (the “Energy Communities IWG”); and
• researchers with expertise in economic development or energy technologies.

We asked the Wyoming stakeholders about their vision and goals for their community, the challenges that they perceived to reach those goals, and their perceptions of federal engagement and support. We asked federal officials about the outcomes they sought to achieve through the Energy Communities IWG, what lessons they learned from their work, and what policy or programmatic changes might advance their objectives. Technical experts were consulted to validate claims of technological potential or resource availability. A full list of major interview questions and interviewees is provided in the Appendix.

This section elaborates on the following findings:

• Wyoming is pursuing a strategy of energy transformation that seeks to continue coal use while developing technologies that avoid the associated greenhouse gas emissions.
• The Energy Communities IWG, and particularly the Wyoming Rapid Response Team, has provided useful resources and offers a model for a promising approach to place-based policymaking.
• Despite the support of the IWG, many local stakeholders still lack the capacity to access complex federal funding opportunities.

Wyoming’s Strategy of Energy Transformation: Continued Coal Use with Captured Emissions

Wyoming has devoted considerable resources to exploring opportunities for coal use to continue at scale while avoiding greenhouse gas emissions. State officials describe this as an “all of the above” energy strategy and believe that emissions from coal, rather than the coal itself, should be the focus of policymakers. Accordingly, state policies and local stakeholders focus on capturing and sequestering carbon dioxide emissions and producing products that use coal as a feedstock rather than a fuel source.

As a result, the Powder River Basin has become a hub for developing technologies and testing sites for carbon capture, utilization, and storage (CCUS). This interest in CCUS overlaps with the Biden administration’s efforts to implement recent federal legislation, which includes billions of dollars in funding for CCUS and related projects, particularly the expansion of the 45Q tax credit along with support for hydrogen and direct air capture hubs (Clean Air Task Force 2023). Given its history with mining and industrial processes along with favorable geologic conditions for carbon sequestration, Wyoming is well positioned to contribute to efforts to commercialize and scale up CCUS.

Several projects in the Powder River Basin illustrate the state’s efforts to find new uses for coal. The first centers on the Fort Union Industrial Park, located on the site of a former coal mine. One benefit of reusing mine sites is that they can support the places and people where extraction occurred in the past. A major asset of many retired mine sites is access to valuable infrastructure, such as electricity transmission and rail lines (Sartor et al. 2023). However, one challenge that has impeded some efforts in Wyoming is the Surface Mining Control and Reclamation Act of 1978, which makes it difficult to repurpose any portion of a mine before the entire site has been reclaimed—a major issue for some large surface mines.

The Fort Union Industrial Park hosts the Wyoming Innovation Center, a small technology facility designed to aid the development of advanced carbon products. The center’s $1.5 million grant from the Wyoming Business Council enabled it to secure a $1.46 million matching grant from the US Economic Development Administration, in addition to $352,000 from the City of Gillette and Campbell County (Lewallen 2021). Facility operators and users are seeking to develop and accelerate the commercialization of products that use coal as a feedstock.

One example project focuses on extracting rare earth elements from coal ash; it is led by the Department of Energy’s National Energy Technology Laboratory (NETL 2022). Another project involves manufacturing activated carbon for use in water filtration systems. The developer, a private company called Atlas Carbon, received financial support from the state of Wyoming but defaulted on the loan in early 2024 (the state and the company have expressed the desire to continue their efforts) (Bleizeffer 2024).

Along with new products, Wyoming is seeking to advance carbon capture paired with permanent sequestration. The state has worked with private firms to develop the Integrated Technology Center, which came online in 2016. The center uses flue (exhaust) gas from the Dry Fork Power Station—designed to serve as a testbed for carbon capture—to bays where different carbon capture technologies are tested and analyzed (Patel 2018). Relatedly, the University of Wyoming operates the Carbon Storage Assurance Facility Enterprise, or “CarbonSAFE.” This project, which has received financial support from the Department of Energy, is testing and analyzing the feasibility of different rock layers for permanent sequestration of carbon dioxide, with the goal of deploying the technology at scale on site (Wyoming CarbonSAFE Project n.d.).

Of course, not all those technologies and projects are destined to succeed. Although state and federal policies are offering billions of dollars in tax credits and other forms of financial assistance, it is unclear which approaches, if any, will meaningfully extend the lifespan of Wyoming’s coal sector. Additionally, high-profile failures have raised doubts about the economic viability of carbon capture projects. For example, Project Bison, which would have been the largest direct air capture project in the world, stated in September 2024 that it was unable to secure enough emissions-free energy to move forward (Hiar 2024). Finally, potential policy changes under the Trump administration and the 199th Congress, particularly related to carbon capture, could affect the financial viability of some of efforts currently underway in Wyoming.

Federal Efforts to Support Wyoming Coal Communities

In its first week, the Biden administration created the Energy Communities IWG (Biden 2021), whose stated goals were to direct federal resources to help coal, oil, gas, and power plant communities create good-paying jobs, spur economic revitalization, remediate environmental degradation, and support energy workers (Dalbey and Raimi, 2024). In practice, the IWG has focused exclusively on coal and coal-fired power plant communities.

One of the IWG’s most important, and challenging, roles has been helping coal communities identify and access federal funds made available through recent policies, particularly the Inflation Reduction Act and Bipartisan Infrastructure Law. Although its initial report to the president (IWG 2021) noted that Wyoming was the nation’s top coal producer and a major oil and gas producer, the IWG did not include any portion of Wyoming in its top-five priority areas (the “Eastern Wyoming non-metropolitan area” was eighth in the list of the 25 top coal-dependent communities). The ranking was based on the coal industry’s share of regional jobs, which is relatively low in Wyoming because of the highly mechanized nature of production.

Although the IWG acknowledged that its choice of metric could miss the regional importance of the industry (e.g., through channels such as tax revenue), Wyoming stakeholders interviewed for this project were upset that the initial report did not identify Wyoming as a high priority. This issue exacerbated preexisting suspicions among Wyoming stakeholders that federal officials did not fully understand the needs of their state.

Subsequent interactions between the IWG and state officials reflected that and related tensions. For example, Wyoming governor Mark Gordon expressed frustration during meetings with federal officials over what he viewed as inconsistent application of environmental regulations. In response, and with the goal of demonstrating that they were serious about supporting Wyoming energy communities, Environmental Protection Agency staff worked with IWG leaders to direct additional resources and attention to Wyoming. Ultimately, this led to creation of the IWG’s first Rapid Response Team (RRT), which we discuss now.

The Wyoming Rapid Response Team: Building Connections and Trust

What became the Wyoming RRT began with several meetings in 2022 between local leaders from Wyoming’s most coal-dependent counties and federal officials, who were primarily in “listening mode” to build trust and better understand local needs. In the following months, officials from the state Department of Environmental Quality, the governor’s office, and economic development organizations joined these conversations.

Even as federal officials worked to establish trust with state and local partners, state officials grew frustrated at failures to secure competitive federal grants. A particular area of contention was the state’s failure to be listed among the finalists for the Economic Development Administration’s Coal Communities Commitment. Wyoming failed in other competitive federal grant programs, such as the Department of Energy’s Clean Energy Demonstration Program on Current and Former Mine Land (Office of Clean Energy Demonstrations n.d.). One local official noted at the time, “How does it work that we don’t get any of the funding for coal communities when we produce nearly 50 percent of the coal? ”

To help address these concerns and demonstrate an ongoing commitment, the Wyoming RRT was formalized to create a consistent liaison between local and state stakeholders and federal agencies, connecting communities with officials who could be responsive to their requests. One tangible result of that collaboration has been the creation of Wyoming’s Office of Economic Transformation, based Campbell County, by far the largest coal-producing county in the nation. This office, supported by funds from the federal Economic Development Administration (facilitated by its participation in the RRT), supports local efforts to carry out planning activities and attract investment to diversify Campbell County’s economy (Stroka 2023).

Another tangible outcome of the Wyoming RRT was the Wyoming Funding Summit. Building on the relationships between the IWG and the office of US Senator Cynthia Lummis, the senator’s office planned a summit to bring federal officials to Wyoming to speak about their programs. This resulted in multiday meetings in 2023 and 2024, along with state funding to support grant writing for communities that had identified promising federal funding opportunities.

During the 2024 summit, the state rolled out its Wyoming Grants Management Initiative. Housed in the State Budget Department, this office is designed to help state agencies and local governments apply for, obtain, and manage federal funding (a challenge that we discuss in the following section). Another outcome of the summit was the Wyoming Grant Assistance Program, which provides technical assistance to local governments, nonprofits, and small businesses in navigating federal grant opportunities that align with local priorities (Wyoming State Budget Department 2024).

Continuing Challenges: Complexity of Federal Programs, Lack of Community Capacity

Despite the considerable efforts of local, state, and federal stakeholders, our interviewees described significant remaining challenges to support Wyoming’s economic transformation. First among these is a continued lack of local capacity to access federal funds, partly because, despite exceptions (DOE 2024), few federal programs directly support local capacity building on these topics. Other sectors of civil society, such as philanthropy and nongovernment organizations (e.g., the Just Transition Fund), can help address that gap, but their resources are limited. Local stakeholders noted that funding for additional staff or improved data-gathering infrastructures would be particularly useful.

A second major challenge has been the complexity of federal grant applications. One state stakeholder bemoaned the repetitive nature of applying for federal funding and having to reenter information on each application. Some federal grant makers, such as USDA’s Rural Development __program, have worked to standardize applications, but such efforts are not widespread across the federal agencies of the IWG. Relatedly, federal grants often involve cost share, where local entities are expected to contribute substantial sums (often millions of dollars), disadvantaging the communities that may need the most support.

Another area of frustration among interviewees was the competitive aspect of many federal grant programs. Spending considerable time and effort on a grant application only to lose out to a better-resourced competitor not only wastes time and money for communities that are already constrained, it can also discourage them from seeking future grants. Instead, stakeholders preferred a more formula-based approach, even though such an approach comes with its own challenges, such as developing criteria that precisely target the places most in need.

Finally, the inclusion of labor provisions to take advantage of certain grant programs or tax credits created challenges for Wyoming communities, given the state’s “right to work” laws (2023 Wyoming Statutes 2024). For low-capacity communities with little union presence, fulfilling the requirements was challenging, if not impossible in some cases.

Wyoming’s energy transformation strategy acknowledges that the future of coal will differ from its past. One local official stated,

"Let’s say you own a grocery store, and you had one particular product line that was your staple forever. Then people stop buying it. You got to change. Are you just gonna sit back, cross your arms and be pissed and say they’re stupid, they’re wrong? Or are you going to change what’s on your shelf?"

Despite participants’ very different political orientations, sustained trust building among local, state, and federal stakeholders has made tangible progress and created new opportunities. The efforts have helped local and state officials better understand the federal resources that are available, and likewise helped federal staff tailor their efforts to better meet local needs. Such an outcome could not have been possible without regular and sustained good-faith engagement. As one official noted, “I just care about delivering for the communities and workers that are being hit hard by the transition. For that, we need constructive dialogues. They don’t have to be perfect dialogues.”

Wyoming is taking a unique approach to addressing the decline of coal and seeking to position itself as a leader in carbon capture, utilization, and storage. Through the Wyoming RRT and other policies, the federal government is providing support for the state to pursue that strategy. Although many challenges remain and success is far from assured, these collaborative efforts represent a model that could be replicated to bridge the considerable divide between the federal government and fossil fuel–dependent communities, helping to build economic resilience in a rapidly changing energy landscape.