The Washington Post:
The battered U.S. coal industry is showing flickering signs of life. Yet the prognosis for Big Coal remains dim.
Coal prices are about double what they were a year ago. Rail car deliveries of coal are up 16 percent this year. The more than 50 coal mining firms that went bankrupt over the past couple of years have unloaded billions of dollars of debt. And President Trump has vowed to roll back environmental regulations that the industry says are part of a “war on coal.”
The stocks of coal companies have enjoyed a “Trump bump” thanks to the president’s pledges to “bring the coal industry back” and “put our great miners and steel workers back to work.” Half a dozen big companies have seized the moment to issue stock or sell bonds to raise money from optimistic investors willing to wager on a friendlier Trump administration. Peabody Energy, the nation’s biggest coal behemoth, hopes to win court approval to come out of bankruptcy in April.
But the obstacles on the other side of the ledger remain daunting: Coal-fired power plants continue to shut their doors. Bountiful supplies of U.S. shale gas are keeping natural gas prices low and competitive, and renewable sources of power generation are growing rapidly. Though most experts expect U.S. coal sales and output to top last year’s levels, they also expect the decline to resume in 2018.
“The coal industry is saying it’s back. It’s not back,” said Tom Sanzillo, director of finance at the Institute for Energy Economics & Financial Analysis. “This is a fool’s errand.” The institute is supported by a variety of liberal philanthropies.
Some coal companies will survive, and some could thrive. Metallurgical coal will be needed for steel both in India and China as well as in the United States, especially if there is a boost in infrastructure spending. And thermal coal will still be used to generate electricity for years, even if at lower rates.
But in order to show profits, they will have to trim output from the oldest, least efficient mines in Appalachia (where Trump garnered crucial votes in the election) and shift their focus to the Illinois Basin and the Powder River Basin in Wyoming.
Those big open pit mines need fewer workers — doing nothing to help Trump bring back jobs for “our great miners.”
“A lot of people conflate two primary things: the coal industry and coal jobs,” said Chiza B. Vitta, a coal analyst at Standard & Poor’s. “Even if the coal industry were to do better, that doesn’t translate into coal jobs. Over time the process has become more and more efficient and they’re able to mine with fewer and fewer people working.”
Some analysts don’t even expect the industry to do better.
“Trump’s rhetoric on the campaign trail would also suggest that coal is about to see a big lift in the post-Obama era, but the reality may be less rosy,” Citigroup said in a series of reports to investors earlier this year. “The regulatory environment for coal should improve under Trump’s presidency,” the bank said. But, it added, “comparative economics for coal, renewables and gas place clean coal firmly at the bottom of the stack in the U.S.”
“Our folks are so excited to have a pro-coal president and we thank you so much for being on our side,” McConnell said at the White House event, adding that the last eight years brought a “depression” to eastern Kentucky. In fact, the Federal Reserve Bank of St. Louis reports the unemployment rate in Clay County, one of the hardest hit counties in the state’s coal region, at 8.4 percent in December, half the rate it was at its peak in January 2010. It was already 14.1 percent when President Obama took office.
In Arizona, the Navajo coal-fired generating station could also provide an early test. Its owners have decided to close the massive coal plant. The Native American tribe, whose members hold about 90 percent of more than 400 jobs, is appealing to Trump administration for help in keeping the plant running. Yet doing that would be expensive. Sanzillo estimates that the Navajo station produces electricity at rates about 50 percent higher than market rates.
“There’s no good economic reason to keep NGS on life support, and indeed the time for closure has come,” Sanzillo’s group said in a blog post. “The plant is emblematic of a core challenge facing the traditionally hidebound U.S. electricity-generation industry, as the market for coal-fired electricity is shrinking.”
And, he added, “that’s regardless of recent political events.”