U.S. Coal Makes a Comeback

  • Date: 17/08/17
  • The Wall Street Journal

Coal is showing signs of a revival and breathing economic life into West Virginia and other coal states. It is becoming more competitive as a fuel source as the price of natural gas has risen 63% since March 2016

Not long ago liberals hailed the demise of coal as inevitable while the Obama Administration strangled the industry with regulation. But don’t look now, Tom Steyer, because coal is showing signs of a revival and breathing economic life into West Virginia and other coal states.

Former Environmental Protection Agency Administrator Gina McCarthy proclaimed in 2015 that coal “is no longer marketable.” She planned to be the lead undertaker. The Obama Administration worked tirelessly to fulfill her mission and may have succeeded had Hillary Clinton become President. “We’re going to put a lot of coal miners and coal companies out of work,” the 2016 Democratic nominee famously promised.

Yet the Trump Presidency seems to have lifted animal spirits and coal. Weekly coal production has increased by 14.5% nationwide over last year with even bigger bumps in West Virginia (19%), Pennsylvania (19.7%) and Wyoming (19.8%). Exports were up 58% during the first quarter from last year. Apparently coal can be marketable if regulators let it be.

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The Obama Administration first targeted coal consumption with rules on mercury emissions and ash disposal that would have made it next to impossible to build a new coal-burning power plant. Then came the 2015 Clean Power Plan that would have forced the existing fleet of coal plants into early retirement.

Finally, the Obama anti-coal warriors sought to shut down coal’s export potential. Thick-seamed coal on federal land in the Powder River Basin overlying Wyoming and Montana is relatively clean-burning and inexpensive to mine. The Obama Interior Department suspended new coal leases on federal land last winter and then reassessed royalty payments—thereby reducing investment and profitability. In December came the coup de grâce: Interior’s stream rule usurping state authority over permitting.

President Trump has called a cease fire to his predecessor’s “war on coal.” In February he signed a resolution repealing the stream rule under the Congressional Review Act. The Supreme Court stayed the Clean Power Plan in February 2016, and EPA Administrator Scott Pruitt is dismantling the power rule as well as the ash and mercury rules. Interior Secretary Ryan Zinke has re-opened leases and rescinded the royalty revaluation.

Meanwhile, coal is becoming more competitive as a fuel source relative to natural gas, whose price has risen 63% since March 2016 amid an expanding market. The Energy Information Administration says the U.S. will be a net exporter of natural gas this year.

Growing pipeline networks have boosted gas exports to Mexico and are providing new domestic outlets for gas trapped in the Marcellus and Utica Shales. Pipeline export capacity to Mexico is expected to nearly double by 2019. Several interstate pipelines are under review to deliver gas to the Midwest, eastern Canada and Gulf Coast for export. Liquefied natural gas exports have increased six-fold in the last year, and five new terminal projects are expected to be completed within three years. While coal and natural gas compete as electric power fuels, they can both prosper if energy markets expand.

This is all horrifying to the climate-change lobby, but they might note that U.S. coal exports are rising to countries that claim climate-change virtue. Exports to France increased 214% during the first quarter of this year amid a nuclear power plant outage. Other European countries like Germany and the U.K. are utilizing U.S. coal to stabilize unreliable renewable sources and make up for electric capacity lost from the shutdown of nuclear plants. First-quarter coal exports were up 94% to Germany and 282% to the U.K. Et tu, Angela Merkel ?

Coking coal used to make steel is also currently a hot commodity, and its price can soar whenever a storm hits Australia and shuts down mines as one did this spring. Metallurgical exports to China rose 357% during the first quarter. As much as Mr. Trump denounces China’s overproduction of steel, U.S. coal miners are benefitting.

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The bigger story is that there’s still demand for U.S. coal if regulators allow energy markets to work. The Energy Information Administration in June projected that U.S. coal power generation will increase by 13% by 2025 “as the existing fleet of coal-fired generators can be more fully utilized and fewer coal-fired generators are retired.” With the Obama Clean Power Plan, the EIA had forecast a 2% to 16% decline.

Coal production will likely never return to its heyday of decades ago. Recent bankruptcies that have made coal companies leaner and more competitive also mean that fewer workers are needed to produce the same output. But even the current modest rebound is helping coal states.

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