Economy, Regs, & Taxes

Coal's Potential Comeback?

There are still signs of life in the industry, but it's going to take further deregulation and a favorable market.

James Shott · Apr. 12, 2017

It’s the politically correct idea among many Americans that coal as a major industrial fuel is dead, or at least dying, and that “cleaner” fuels like natural gas, wind and solar energy (and maybe unicorn dust) are taking over. There is some reality there, especially for natural gas due to the advancement of technology making it cheaper. But there are other influences on coal’s recent decline.

Less costly natural gas has become the fuel of choice in power plants and for other industrial uses. That’s not entirely because of the natural relative price of the fuels, but because the regulatory overkill on mining and burning coal requires enormous investments that have priced coal higher than natural gas. Remember Barack Obama’s prediction: “So if somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them.”

These regulations produced the closing of more than 400 coal-burning power plants, which dropped the demand for coal. That in turn put 63,000 people in the coal industry, electric production industry and related support industries out of work in just the last few years.

At the same time hydraulic fracturing (fracking) became popular, after lying mostly dormant since its first commercial application in 1957. That produced a boom in natural gas production at attractive prices to compete with coal.

Many think burning less coal is a great thing, because burning coal fouls the air and is dangerous to our health. But that “truth” loses importance when you know the actual infinitesimal improvement in air quality derived from burning less coal.

However, considering all those factors, and paraphrasing a famous quote attributed to Mark Twain, the rumors of coal’s demise have been greatly exaggerated.

Coal likely will never regain its former dominance among industrial fuels. Time and technological/industrial evolution would just as certainly, although much more gradually, have eaten into coal’s popularity without the help of Obama’s War on Coal.

But several things point to a continued market for American coal: Trump’s regulatory relief, the growing acceptance of the idea that the climate change/global warming mania is dramatically overstated, the reality that coal is still the best fuel for many things, the fact that many countries that do not have domestic coal supplies depend upon it for fuel, and the improvement in coal-burning technology.

And let’s not forget that fossil fuels made up 81% of the fuels used to produce electricity in 2016, and coal is still the primary fossil fuel in electricity production.

Industry insiders like Murray Energy CEO Robert Murray see a partial resurgence in coal. “Coal will grow back,” he told Fox Business Network’s Stuart Varney. “But we’re in a decline right now.”

He went on to say that Trump “can bring back at least half of those [63,000 lost] jobs as the economy grows and as he ends the regulations on coal.” He noted that we have not had a level playing field in coal because, instead, “the government has been picking winners and losers.”

And he told Maria Bartiromo, also on Fox Business Network, that Obama closed 411 coal-fired plants, and that the Clean Power Plan, which Trump ended recently, would have closed 56 more plants. That, he said, would have caused a steep spike in electric rates. “As [Trump] grows the economy [and] brings jobs back to America, coal will participate in that growth because we are one-sixth the cost of a windmill and one-fourth the cost of natural gas,” per kilowatt-hour, Murray said.

Rep. Bill Johnson (R-OH), “The coal industry knows and understands how to mine coal … and protect our environment. We don’t do it the way it was done 50, 60 years ago.”

Here are a few pieces of evidence that coal isn’t dead yet:

  • Reports from the Kentucky, West Virginia and Virginia coalfield regions say that mines are cranking back up and miners are being rehired. Train yards are seeing cars filled with coal moving through them in greater numbers.

  • Kingdom Resources plans to take over operations of one of the old Enterprise mines in Knott County, Kentucky. The company plans to hire 60 workers.

  • A southern West Virginia college recently held a Job Fair to immediately fill 85 open coal positions in mines in two counties. The coal from these mines is used in making steel.

  • Coal exports through Hampton Roads last month rose more than 50% from last year’s level, led by a nearly five-fold increase at Newport News' Pier IX, according to the most recent Virginia Maritime Association statistics. “A lot of mines are open again,” said Harry Childress, president of the Virginia Coal and Energy Alliance.“

  • Fox News reports that in Wise County, Virginia, "A long-awaited revival is under way in this beleaguered Central Appalachia community where residents see coal as the once and future king. Trucks are running again. Miners working seven days a week cannot keep up with current demand.”

Few if any argue that the coal industry will return to its former greatness, but it will certainly endure for many years at a lower level if natural forces are allowed to work, free of politically correct environmental engineering. These aforementioned items represent the beginning of coal’s potential comeback.

When you replace regulations resulting from shortsighted ideological goals with a level of business regulations based upon common sense, good things can happen.

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