Coal Industry's Uncertain American Future, Part One: Politics and Environmental Law

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Researched by Industrial Info Resources (Sugar Land, Texas)--While the U.S. Coal Industry is facing serious challenges, rumors of King Coal's demise are, for now, greatly exaggerated. Political, legislative and economic factors are all part of coal's future viability in the U.S. economy, but there is also an international dimension. This article looks at the first two of four factors--politics and environmental law--that complicate coal's future in the U.S. Power Industry. Part Two will look at coal's domestic competition with natural gas and American coal's international market.

Playing Politics
First, the political environment surrounding the U.S. Coal Industry is more complicated than would appear to the casual observer. Dating back to at least 2008, when then-Senator Barack Obama was running for President, coal industry supporters have been pointing to an apparent anti-coal agenda. In a January 2008 interview with the San Francisco Chronicle, then-candidate Obama said: "So if somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted." The stance taken in this quote is clear enough.

What is less publicized by coal industry supporters, however, is that in the same 2008 election cycle, Obama's opponent, John McCain, gave a speech on climate change in which he said: "And the same approach that brought a decline in sulfur dioxide emissions can have an equally dramatic and permanent effect on carbon emissions. Instantly, automakers, coal companies, power plants and every other enterprise in America would have an incentive to reduce carbon emissions, because when they go under those limits they can sell the balance of permitted emissions for cash. As never before, the market would reward any person or company that seeks to invent, improve, or acquire alternatives to carbon-based energy...A cap-and-trade policy will send a signal that will be heard and welcomed all across the American economy."

A lesser quoted part of Obama's statement in that 2008 interview with the San Francisco Chronicle referred to what would be done with the funds derived from carbon emissions caps. In that regard, Obama said: "That will also generate billions of dollars that we can invest in solar, wind, biodiesel, and other alternative energy approaches." So both McCain and Obama were talking about a cap-and-trade system that would be used to curb carbon emissions and develop alternatives.

The Mixed Role of Environmental Legislation
Second, the impact of environmental legislation is also more complicated than generally portrayed. One side of the picture is that legislation will necessarily reduce coal's viability in the U.S. Power Industry. The Supreme Court is not likely to rule on the Mercury Air Toxic Standard (MATS) case before the end of this year or early next year. The D.C. Circuit Court has hearings scheduled for March 11, 2015, to start the process of resolving the objections to the Cross-State Air Pollution Rule (CSAPR). While both MATS and CSAPR are not yet fully resolved, these rules are sure to make it significantly harder for new coal plants to be built and for older coal plants to stay operational.

Seldom mentioned, however, is the role the U.S. Environmental Protection Agency (EPA) may have played in growing one segment of the coal industry. Before 1990, coal from eastern states dominated the market. That coal has higher sulfur content than the coal available in other parts of the country like the Powder River Basin area, which straddles Montana and Wyoming. So, when the EPA introduced rules regulating sulfur dioxide emissions, the economic viability of Montana and Wyoming coal was significantly boosted.

The pendulum is now swinging back in the other direction, with new EPA rules to limit carbon emissions. Industrial Info published a series of articles on the Clean Power Plan and how various states reacted to it.

For more information, see July 10, 2014, article - Nine States Join Lawsuit Opposing EPA Carbon Rules.

The combined impact of the EPA's emissions rules is certain to reduce coal's share of the U.S. power generation market. Estimates of this share diverge considerably. The EPA estimates that coal will still account for 31% of electricity generation by 2030, while market analysts have argued that it likely to drop below 25%.

Look for the second part of this article examining the coal industry's future in the coming days.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.