Coal’s Cloudy Future: The Factors in The Fossil Fuel’s Decline

By Brian Sewell

A light winter that dented demand is the least of the coal industry’s worries in a year of unprecedented challenges that may point to a very frigid future.

While the industry is familiar with market fluctuations and the shifting regulatory framework, analysts considering coal’s present challenges, especially natural gas’ affordability and abundance, are saying it will be difficult to recover.

In June, the Energy Information Administration reported that during the month of April natural gas-fired electricity caught up to its coal-burning counterpart. Both sources contributed about 32 percent of total electricity generated in the United States during that month.

In domestic markets, coal is finally facing a true competitor and investors are taking note. “Get out of coal,” the investment analysis website advised shortly after the EIA’s announcement. Among other indicators, the steady decline of coal stocks reveals that natural gas is already taking its toll. Prices for major Central Appalachian coal producers such as Alpha Natural Resources and Arch Coal continue to fall.

Casting a deeper cloud of uncertainty over the entire sector, Patriot Coal filed for bankruptcy in July, having reported considerable losses every year since 2010. The St. Louis-based spin-off of Peabody Energy lost nearly $200 million in the fiscal year that ended March 31 and had collected more than $3 billion in debt.

In an effort to save itself, Patriot had increased exports to China, the world’s largest coal consumer and a nation that looms large for United States coal producers. The demand overseas, however, was not enough to serve as Patriot Coal’s lifeboat. Other Appalachian-focused coal producers have also looked to exports as a viable way to stay afloat.

On July 19, Rep. Ed Markey, the ranking democrat of the House’s Natural Resources Committee, released a report, titled “Our Pain, Their Gain,” that analyzes data from the EIA, the U.S. Mine Safety and Health Administration and self-reported data from 97 mines. According to the report, exports from mountaintop removal mines in Kentucky, Pennsylvania, Virginia and West Virginia have increased by 91 percent since 2009. Some of the mines exported 100 percent of their production in 2011.

“The coal may be shipped to foreign markets,” Rep. Markey said the day the report was released, “but the diseases, the destroyed mountaintops, and the environmental ruin from these destructive practices are staying right here in America.”

Recent public backlash in response to proposed ports and the expansion of exports on the west coast will not be easily overcome. Nor will the challenges associated with geographic distance and transportation change – analysts believe Australia and Indonesia rather than the United States are in the best position to appease China’s demand for coal.

For Appalachian coal miners, the effects of coal’s decline are much closer to home. In June, Arch Coal announced it would lay off 750 workers, citing “the unprecedented downturn in demand for coal-based electricity.”

That unprecedented downturn has caused the industry to focus their ire on environmental regulations for the challenges coal faces. In June, an attack on the U.S. Environmental Protection Agency’s greenhouse gas rules failed when a federal court ruled the EPA’s interpretation of the Clean Air Act to pursue the regulation of carbon dioxide to be “unambiguously correct.”

Industry leaders and politicians who lambast President Obama’s “war on coal” are backed by miners and families that depend on the coal industry for their living and are fearful of its uncertain future. Recently, the coal industry’s rhetoric spurred one of its most ardent Congressional supporters to speak out.

“The reality is that many who run the coal industry today would rather attack false enemies and deny real problems than find solutions,” West Virginia Sen. John Rockefeller said on the Senate floor in June. “Scare tactics are a cynical waste of time, money, and worst of all coal miners’ hopes. But sadly, these coal operators have closed themselves off from any other opposing voices and few dared to speak out for change – even though it’s been staring them in the face for years.”

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  1. brian on August 13, 2012 at 10:52 am

    Hey Hollins,

    Thanks for your thoughtful comment. It’s clear that you’ve done your own research, thought critically about the issue and then used that knowledge to brush off the enormous amount of misinformation flooding the areas most affected by coal’s downturn.

    I’ve been thinking a lot about the power of denial lately, especially after reading an article about prison overpopulation — the logic being “if we just build enough prisons, we can solve growing crime.” Similar to the prison crowding scenario, the coal industry has chosen to deal with a symptom rather than address the root of the problem.

    This approach would seem simpler in the short-term, after all the EPA is a much easier to point the finger at than say natural gas. Unfortunately, denial’s role almost guarantees that this will be very costly in the long run. I couldn’t agree more that this is “a time of change that has come about simply by the laws of nature.” Now, let us process that change with a clear head, keeping those whose lives will be and are being impacted, not the coal CEO’s who want to keep up production and profits regardless of the human cost.

    I’m also interested in the role that the media plays in either spreading or dispelling myths.. before and since this piece was published, several articles have come out in large newspapers in Appalachia that we think do a good job of operating on fact, not the “he said, she said” bickering between coal and its opponents.

    Check them out:

    Thanks again for your comment.


  2. Hollins Corner on August 12, 2012 at 1:47 am

    Thank you for this clear, factual to the point, honest interpretation of all of the elements that are involved in this issue. I am a political science/pre-law student in Ga. I am from East TN and grew up hearing stories of coal mining. I know how vital the mines have been to providing a source of income to appalachian families for the last 100 years. I have been researching this topic for hours and had come up with a general consensus the same as yours. Many of my friends and family are blaming the federal government for the recent layoffs by ARCH. That blame is very misleading. The Governor of Kentucky admitted that they have known for years this was coming. The federal government is working as fast as they can to create coal technology that will reduce the Carbon omissions. Millions of dollars have been given to the leading research centers to find a solution yesterday. But as you stated all of this is irrelevant. The lay off’s are about the competition with natural gas. There are just as many lobbyists and congressmen fighting for the use of natural gas as their are for coal. And unfortunately the coal industry has many things going against it such as safety, environment and health risks. This is unfortunately a time of change that has come about simply by the laws of nature. The company makes no mention of the layoffs on their website other than the same brief statements that can be read in headlines across the region. I also did not find and formal appology or statement of concern about the lay offs on their site. But I did find lots of marketing for investors. I also saw that they are in the top five in the stock market and are grwoing. As for the people facing unemployment I hope they realize that the same President they are mistakenly blaming for their loss of work is the person who will continue to fight for unemployment and welfare programs that keep people in situations like this from suffering. I pray that this information reaches the masses in Kentucky, West Virginia and all of the families and friends of those affected before they go out and vote for a President who will cut the welfare programs, unemployment, social security, medicare etc while he gives compnanies like Arch huge tax breaks so they can put it all back into his campaign 4 years from now. Such a tragedy.

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