With the U.S. presidential debates already underway so too are the advertising campaigns -- especially in coal country, where the anti-Obama sentiment is in full stride among nearly all declared candidates. Their message: an unabated ‘War on Coal’ continues, which fails, however, to tell the whole story.
Some major coal operators have recently declared bankruptcy, with others in dire straits. While President Obama’s policies to restrict air pollutants and specifically, carbon releases, have not helped their cause, their woes are in large measure because of the availability of cheaper and cleaner fuels, and having made some bad bets.
“Plain ole economics is the main thing,” says Charles Bayless, former chief executive of Fortis Inc.'s Tucson Electric Co. and
Politically, the president’s opponents have successfully tied coal’s downfall to his administration’s policies, notably the recent Clean Power Plan to reduce carbon emissions by 32 percent by 2030. However, CEO Bayless says that both Republicans and Democrats have taken aim at the coal sector since the inception of the Environmental Protection Agency in the 1970s.
Given that power plants are 50-year investments, utilities -- for better or worse -- often take the path of least of resistance. “What I worry about now,” he adds, “is relying too heavily on natural gas.”
What the people of coal country worry about, however, is more basic: their livelihoods. While it is possible that newfound supplies of natural gas could replace coal’s economic contributions, the two industries have much different labor needs, Bayless says: The coal industry is labor intensive while natural gas development is not. With that, he says that mechanization will catch up with coal and allow mining with increasingly fewer people.
Bayless, whose roots are wide and deep in Appalachia, says that he often appears at power generation meetings nationally and in the major coal producing states -- and that his message is consistent and clear: Global warming is real and requires immediate action.
“Many people say that they understand this warning but that they do not want to voluntarily give up their livelihoods,” says Bayless. “Any decrease in pollution must be spread around the globe -- to more than 7 billion people. So, there is almost no local benefit, especially if jobs are lost. Still, somebody has to start and someone has to lead. The United States has to play.”
Can Appalachia reach a turning point? It must: “In West Virginia, specifically, the easy coal is gone and the remaining coal is lower quality. There is more mining -- more expense -- per unit of remaining coal.”
While historically, coal had employed tens of thousands in that state, the economic transition has taken its toll. Consider:
As for the most recent downfall, Alpha, it wagered on “metallurgical” coal that is used to make steel, and which has seen prices nosedive. When combined with its $7 billion purchase of Massey Energy in 2011, the company collapsed. Meantime, “thermal” coal used in electric power generation is losing out to natural gas, which releases about half the carbon as does coal and which is expected to increasingly expand its market share.
Macquarie Research issued a statement earlier this year saying that the outlook for U.S. coal producers is "increasingly bleak." Even China, which has been the industry’s fallback market where more coal could always be sold, reduced its demand by nearly 3 percent in the last year because of an economic slowdown.
“The price decreases that occur during the process are likely to result in production cuts and bankruptcies over the near-to-medium term,” the analysts wrote in March.
Blame it on Obama? No. Blame it on market forces, which have not just provided the tools to dig out shale gas but to also commercialize advanced windmills and solar panels. In lay terms, coal’s financial and political troubles are because the electorate wants cleaner air and water, which has fostered innovation. And national policy has fallen into place and enabled the evolution.
“It used to be that utilities would first dispatch coal because it was the cheapest and most reliable fuel,” says CEO Bayless. “Now, it is most often natural gas.”
When the political campaigns begin in earnest, the “War on Coal” rhetoric will no doubt get ratcheted up. But if economic survival is, indeed, the underlying concern, the candidates may want to convince their contemporaries to attract investment in the country’s new economic engines, and to implement the policies that would help facilitate such a future.
