Welcome!
2016-11-20 09:52:22
A Bleak Outlook for Trump’s Promises to Coal Miners

Donald J. Trump made coal a centerpiece of his campaign, holding rousing rallies with miners in hard hats, who he said had been neglected under eight years of the Obama administration. The strategy paid off, helping him score crucial wins in Pennsylvania and Ohio.

Now, though, coal may prove a different sort of symbol — that is, of the challenges that the president-elect will face delivering on his many promises to restore struggling sectors of the American economy.

The United States coal industry and the jobs that support it have been in decline for decades as a result of environmental concerns, automation in mining and slowdowns in manufacturing industries that burned coal for power.

And these days, no matter who is president, coal is at the mercy of market economics. Coal’s No. 1 rival is cheap, cleaner-burning natural gas — which could become an even more potent competitor under the incoming administration. The probable easing of restrictions on pipeline building and loosening of rules on gas exploration and production would mean more natural gas reaching the market.

Despite recent increases, coal’s price has been drifting downward for years. But the price of natural gas has fallen even more sharply.

“I don’t think the Trump presidency will have a material impact on bringing coal miners back to work,” said Ted O’Brien, a coal analyst at Doyle Trading Consultants, a leading energy industry research firm.

“He may eliminate the regulatory overhang,” Mr. O’Brien said, referring to the environmental rules that have cast a shadow over coal, “but I have a hard time seeing a surge in coal demand.”

Coal’s long decline predates President Obama’s arrival in the White House in 2009. The collapse of the American steel industry in late 20th century reduced demand for the metallurgical coal that is mined most prominently in Appalachia.

In addition, utilities have been slow to build new coal-fired power plants in recent decades because of air-quality concerns over the burning of the other type of coal — thermal coal — that is used for power plants and is mined across the country.

Mr. Trump campaigned to help both kinds of coal recover.

But natural gas may prove unbeatable. The hydraulic fracturing boom in shale fields that began a decade ago flooded the market with cheap natural gas that continues to erode coal’s market share. As recently as early 2008, coal was the source of roughly half of the electricity generated in the United States. Now it is down to about 30 percent.

“There’s just a lot of gas in this country, and that is going to hold gas prices down,” said Scott Sheffield, chief executive of Pioneer Natural Resources, a major oil and natural gas producer, who said he voted for Mr. Trump.

The bleak outlook for coal may explain why some of the industry’s executives have been reluctant to comment on how the Trump presidency may help their business: They may be wary of raising false hopes among their workers. And many may be reluctant to repeat past industry arguments that climate change was a hoax. Instead, coal producers would rather have tax incentives to support environmental improvements for coal-fired plants, as a way to ensure coal’s long-term viability even beyond a Trump administration.

“Any exuberance has to be tempered,” said Richard Reavey, vice president for government and public affairs at Cloud Peak Energy, a major Western coal producer. “The view should be cautious optimism.”

Beyond the declining demand for coal, there has been an even more fundamental factor behind the shift in coal mining employment, which peaked decades ago. As with those in many industries, jobs in mining have fallen victim to automation. High-tech shears can now shave coal from underground seams — work that formerly required hundreds of miners. Surface mining, which has been increasing in recent years, has also replaced many workers with heavy machinery.

As a result, there are now just over 50,000 jobs in the American coal mining industry, down from a peak of more than 250,000 in 1980.

Most of the losses have come in Appalachian mines — which produce coal for making steel and electricity — because they are older, deeper and more expensive to operate. But automation is hitting employment in mines across the country.

“The industry is simply not going to produce the number of jobs that were historically available in the coal fields,” said Patrick C. McGinley, a law professor at West Virginia University, who focuses on coal issues.

A few years ago coal executives hoped exports — which represent about 8 percent of national production — would boom along with the economies of China and the developing world. But exports peaked in 2012.

Since then, slower economic growth in the developing world, along with climate and pollution concerns, have depressed demand for coal.

The same considerations have prompted international development banks and large investment companies like JPMorgan Chase and Bank of America to pull back on financing new coal-fired plants — a trend that is unlikely to change under Mr. Trump.

The Trump administration could help the coal industry somewhat by unwinding President Obama’s Clean Power Plan, which was designed to replace coal-fired utility plants with those using natural gas and renewable energy sources. But the effects of the plan so far may be hard to reverse.

The tighter air pollution regulations, which are still under challenge in court, forced utilities to choose between revamping aging coal-fired power plants to make them cleaner, or switching to natural gas or green sources like wind and solar. Utilities across the country typically decided to switch.

Last year, as a result, 94 coal-fired power plants were closed across the country, and this year 40 more are expected to close by the end of December. It is most unlikely that Mr. Trump could do anything to bring those plants back online.

“All the older power plants that burned Eastern coal have been basically torn down, dismantled, put in mothballs, some of them permanently,” said Robert J. Zik, the now-retired former vice president for operations at TECO Coal, a subsidiary of TECO Energy that was sold to another operator last year.

Other marginal measures the Trump administration might be able to take on coal’s behalf, industry executives say, include rolling back the rules that protect streams from surface mining and easing those for leases and royalties on coal mined on federal lands.

Industry executives say that to extend the life of at least some of the 400 or so coal-burning power plants still in use in the United States, the Trump administration and lawmakers in Congress could work with them on “clean coal” initiatives.

Acknowledging that climate change is an issue even if Mr. Trump does not, Mr. Reavey of Cloud Peak Energy wants federal incentives for utilities to refit existing power plants to burn coal more efficiently and to attach systems to their facilities that will capture carbon emissions and sink them permanently in the ground. Such systems, known as carbon capture and sequestration, are currently so costly that utilities simply prefer to replace coal-fired plants with gas-fired ones.

Even before Mr. Trump’s election, prices of some types of American coal — particularly the metallurgical variety that is mostly mined in Appalachia and is used to make steel — had been rallying.

That, in turn, had sent the stock prices of some coal mining operations soaring in recent months — a huge win for hedge funds that bought up the debt and equity of the companies when they were cheap.

But the big driver for coal’s price run-up was the dwindling supply, as American producers cut back even as Chinese mines were curbing their own production in recent months. Those price benefits are expected to be short-lived, as demand is depressed both by China’s pivot toward cleaner fuels to address the country’s endemic air pollution and by its new focus on a less energy-intensive consumer economy.

“There is optimism that with government support, coal is more viable,” said Mr. O’Brien, the industry analyst. “But the same headwinds still exist that have existed over the past five years.”