Leave it to the Wall Street Journal’s editorial page to saddle President Obama, in advance of Tuesday’s State of the Union speech, with blame for “The Carnage in Coal Country” – which the Journal says has cost 40,000 jobs since 2008, and moved Arch Coal Co. to file for Chapter 11 protections on Monday.
And leave it to Paul Krugman at The New York Times, who knows more than a bit about business and economics, to knock that pitch out of the park:
- First, by noting that the nation’s burgeoning solar energy sector has added more than 100,000 jobs in a shorter period of time (a figure drawn, like the Journal’s, from industry data – in this case, a U.S. Solar Foundation report).
- Second, by pointing out that the coal industry’s ongoing contractions, for economic reasons, had made it “a shadow of its former self” before Obama took office.
So obvious and well understood are such contributing factors as falling world demand and cheap natural gas that Krugman didn’t feel a need to list them. The Journal opinionators acknowledged that market factors were also at work, but in a fleeting and almost grudging way:
We told you in November that coal production nationwide has declined by about 15% since 2008. Reasons include slowing global demand and competition from natural gas in electricity generation. But commodity prices are cyclical, while regulation is forever.
It’s hard to keep track of all the new rules billowing out of Washington and overwhelming coal producers and their customers.
Partial credit, at best, to Obama
Actually, it is not so hard to track the general trend in regulatory philosophy during the administration of Barack Obama, formerly a coal-state senator who championed government-backed “clean coal” initiatives until they died of infeasibility.
This president has often claimed credit for expanding coal, oil and gas production from federal lands under an “all of the above” approach to sourcing U.S. energy needs; roughly 41 percent of U.S. coal production comes from leases on those lands.
Environmental impact has been a factor in leasing decisions since Richard Nixon was in the White House; what this administration proposes to do is to have the review and the rates reflect the climate impacts of coal use, and to temporarily halt the granting of new leases until new policies are in place.
Which is hardly a sellout to environmental groups who want him to stop expanding, and start shrinking, coal production from federal lands. Or a crushing burden to coal companies, which haven’t been buying all the federal coal available anyway.
Overall, on the regulatory front, I think the White House deserves far less blame/credit for contraction in the coal-fired power sector than a concerted, grass-roots campaign by savvy activists who use existing legal tools – coupled with investor outreach – to challenge and kill new coal projects in largely local and state-level proceedings.
Yes, this administration has tightened the rules on greenhouse gas emissions from the electric power sector, and yes, the most important curbs will further disadvantage coal as the Clean Power Plan phases in over the next 15 years.
But it’s worth remembering, too, that this is a sector that for decades enjoyed a sweeping immunity from curbs on other, non-greenhouse pollutants that the Clean Air Act applied to other fossil-fired U.S. industries starting in the 1970s.
The theory was that coal-fired power plants were obsolescent anyway, heading for retirement within a decade or two; utilities found myriad ways to extend those lifespans, with active encouragement from Obama’s predecessors.
Another coal-state senator, Kentucky’s Mitch McConnell, brought a constituent to Tuesday’s speech to humanize his complaints about the president’s supposed “war on coal.” He was Howard Abshire, who used to be a coal miner and now has a job dismantling and removing equipment from closed coal mines.
Not sure whether his case would count toward the Journal’s tally of 40,000 lost “coal jobs,” but it would appear to demonstrate that there are jobs available to miners after they stop mining, even in the coal sector.
I began to wonder if the Journal had editorialized in solidarity with all the U.S. workers who lost their jobs in cigarette factories, tobacco warehouses and such when the government finally got serious about discouraging smoking, especially among young people.
Views from business press
Instead, I thought it would be more productive to look at how the business press and trade publications are apportioning responsibility for coal’s fading fortunes.
Discussing the proposal to raise the price of leases on federal lands, starting with parcels in the Powder River Basin that hold about 600 million tons of coal, mining.com reports that
The promised changes come amid historically weak prices for the commodity worldwide, which have had a major impact on the government’s lease program. The Obama Administration had to put off lease sales involving some 2 billion tons of coal over last year because companies were unwilling to buy.
Tom Sanzillo, director of finances for the Institute for Energy Economics and Financial Analysis, told mining.com that the President’s reform of federal coal leases does for the coal industry what it cannot do for itself — “discipline production, shrink supply and better manage the nation’s energy security and this vital resource.”
Over at Bloomberg, it was noted that Arch Coal has been losing money since 2012, and has adopted a bankruptcy strategy that includes “an agreement with a majority of its senior lenders to erase $4.5 billion in debt from its balance sheet and allow it to keep operating without interruption.”
Industrywide troubles including slower demand from China, competition from Australian exports and cheap gas pushed competitors Patriot Coal Corp., Walter Energy Inc. and Alpha Natural Resources Inc. into bankruptcy last year. High pension costs and the threat of stricter environmental regulation have compounded the coal miners’ woes.
Coal’s share of electricity generation in the United States fell to 30 percent in April, as the historically popular fuel was overtaken by gas for the first time. Coal still generated more than 40 percent of electricity globally and is used in the production of 70 percent of the world’s steel, according to the World Coal Association.
Arch has also had to cope with the effects of its 2011 purchase of International Coal Group Inc. The $3.4 billion acquisition, made when metallurgical coal was selling for $330 a metric ton, increased its exposure to a thermal coal from Appalachia, which has been particularly hard hit as cheaper thermal coal is mined in the Midwest.
Central Appalachian coal fell 13 percent in 2015, capping a fifth annual decline on the New York Mercantile Exchange. Prices closed at $44.33 a metric ton on Friday.
As for the notion that Obama’s last State of the Union message amounted to a notice that your electric bill will be going up, utilitydive.com observed that
For electric utilities, the possibility of these new regulations would mean that the price of fossil resources such as coal or natural gas could rise, although it’s worth noting that both commodities are priced near historic lows today.
And though we wouldn’t call it a business publication, I admired a synopsis of the global coal market from Mother Jones, under the headline “The Coal Industry Is Off to a Terrible, No Good, Very Bad Year.” Excerpts:
The onslaught started at the end of December, when China announced plans to close 1,000 coal mines as part of its campaign to reduce crippling air pollution and the world’s highest greenhouse gas emissions. China also plans to reduce its share of electricity production from coal to 62.6 percent by next year, down from 64 percent now, according to Bloomberg. That’s great news for Chinese citizens, who have recently been subjected to air pollution up to 40 times higher than what the World Health Organization considers safe. But it’s a big letdown for coal producers in the United States, who have been increasingly desperate for new foreign markets for their product; coal demand in the United States has dropped 10 percent just in the last three years. The assumption that China’s seemingly insatiable growth is a safe long-term bet for coal is vanishing—in fact, the latest official estimate is that Chinese coal consumption already peaked back in 2013.
As domestic and foreign demand dip, U.S. coal production has also crashed to a 30-year low, according to federal data released this week. It’s the latest low point of a trend that has been heading downhill since Obama took office.
That trend is being driven somewhat by electricity companies’ anxiety about the Clean Power Plan, Obama’s new rules to limit emissions from power plants. But even more importantly, coal is getting hammered by competition from cheap natural gas. Since Obama took office, natural gas production in the United States has jumped 20 percent, and prices have correspondingly fallen to record lows. … An editorial in this week’s Lexington Herald-Leader argued that “no one should expect a revival of Eastern Kentucky coal jobs when not even Kentucky’s electric utilities can afford to buy the region’s coal.”
All of this is devastating for coal companies’ bottom lines. One recent study found that in the last five years, U.S. coal producers have lost 76 percent of their value. The latest casualty is Arch Coal. … As Think Progress reported, “In early 2011, stock in Arch Coal peaked at $260 a share—on Monday, shares in Arch Coal were worth less than a dollar.”