The Carnage in Coal Country
Arch Coal filed for Chapter 11 protection on Monday, continuing an industry collapse that includes the bankruptcies of Patriot Coal, Walter Energy and Alpha Natural Resources. The White House must be cheering, because this is one Obama energy policy that seems to be working.
As President Obama prepares to deliver his final State of the Union address Tuesday, we wonder if he’ll take pride in the damage his policies have done to the coal industry. According to the National Mining Association, 40,000 coal jobs have been lost in the U.S. since 2008.
The wealth destruction has been equally dramatic. Peabody Energy is a going concern, but its shares have declined by roughly 95% in the last year. Investor Paul Tice recently wrote in these pages that since 2012 “27 coal-mining companies with core operations in Central Appalachia, a region roughly centered in southern West Virginia, have filed for bankruptcy protection.” We told you in November that coal production nationwide has declined by about 15% since 2008. Reasons include= slowing global demand and competition from natural gas in electricity generation. But commodity prices are cyclical, while regulation is forever.
It’s hard to keep track of all the new rules billowing out of Washington and overwhelming coal producers and their customers. Market analyst James Lucier at Capital Alpha Partners says the most potent have been the Environmental Protection Agency’s Mercury and Air Toxics Standards, which have forced the retirement of plants that provide tens of thousands of megawatts of electricity. Then there’s the coal ash regulation. And the new Clean Power Plan to reduce greenhouse gas emissions at power plants.
Even after recent declines in market share, coal-fired plants still provide roughly a third or more of American electricity. So utility customers will notice the coal carnage when they see their monthly bills—or perhaps when the lights don’t go on. But for now the pain is concentrated among those who used to work in the coal fields. They are still waiting for all those new green jobs Mr. Obama has been promising since he arrived in Washington.
See the article here.
- On January 12, 2016