Political risks bedevil Trump's American coal dream
U.S. coal exports between January and May 2017 reached almost 37 million tonnes, compared to 23 million tonnes during the same period in 2016
Despite these challenges, there has been an uptick in U.S. coal exports to Europe and Asia this year. According to the U.S. Energy Information Administration, coal exports between January and May 2017 reached almost 37 million tonnes, compared to almost 23 million tonnes during the same period in 2016. Due to low coal prices, exports to the United Kingdom increased by 175 per cent and exports to France increased by 100 per cent during this period. These trends are unlikely to be sustained as countries are coming under increased pressure to reduce carbon emissions and find cleaner energy sources. Despite this increase over the past 12 months, coal export levels remain significantly lower than overall exports in 2012, 2013, and 2014, and in 2016 total U.S. coal production fell to its lowest level since 1981. In addition to the growth of competitive energy sources domestically, slowing economic growth in China has led to a lower global demand for coal, which has consequently led to lower coal prices, as more coal is present in the market compared to demand. U.S. coal trends The lack of demand for both metallurgical and thermal coal at home and abroad has led to a seemingly irreversible downward trend for coal production in the United States. According to the U.S. Bureau of Labor Statistics, in 2012 the coal industry employed almost 90,000 people ' by January 2017, that number had dropped to 50,000. While Trump cites government regulations as the cause for this decline, the lower price of liquid natural gas (LNG) in the U.S. is the more probable cause. Technological advances in hydraulic fracturing, the method used to extract LNG known as 'fracking', have made LNG extraction significantly cheaper, which has led to a price decrease. The rapid acceleration of fracking in the U.S. since 2000 has led to an increased availability of LNG, which is a cleaner and often cheaper method for generating electricity. Many utility companies are now using gas (including LNG) rather than thermal coal to fuel their power plants. Thermal coal now makes up around 33 per cent of electricity generation in the U.S., down from 51 per cent in 2000. In addition to low LNG prices, the price of renewable energy sources such as solar and wind has dramatically decreased in recent years and is gaining popularity among customers demanding cleaner energy sources. Automation within the industry has also contributed to the decline in coal jobs. Machines such as self-driving semi-autonomous drills and bulldozers, which allow one operator to control several dozers simultaneously from an office chair, are being used to reduce headcount. These factors have combined to mean that U.S. coal producers have suffered from the increasingly competitive energy market, with the two largest coal producers in the U.S., Peabody Energy Corporation and Arch Coal, Inc., filing for bankruptcy in 2016. Nearly half of all coal mined in the U.S. is produced by companies that have filed for bankruptcy since 2012.
Regulatory rollback As part of the plan to revive the coal industry, the Trump administration has rolled back several business regulations. In March, Trump signed an executive order rolling back the Clean Power Plan, implemented by his predecessor Barack Obama to meet the U.S.'s obligations under the 2015 Paris Agreement. The Paris Agreement is a non-binding agreement amongst 197 countries with a goal of combating climate change.' The Clean Power Plan's objective was to cut carbon emissions by taking a number of steps, including closing hundreds of coal-fired power plants.
Mines on federal land produce 40 per cent of the U.S.'s overall coal outputThe Department of Interior is in the process of reviewing millions of acres of federally protected land, known as national monuments, to assess the possibility of leasing the land to companies for coal, oil and gas exploration. This follows an announcement in March ending an Obama-era moratorium on new leases for coal companies looking to mine on federal lands as well as the end to a study on the environmental effects of coal mining. Mines on federal land produce 40 per cent of the U.S.'s overall coal output. Furthermore, the current administration has re-opened a tax loophole closed by the Obama administration that allows coal producers to pay government royalties at a much lower rate than the 12.5 per cent stipulated under federal law. These 'deregulations' are facing a series of lawsuits brought by New Mexico state, California state, ranchers and Native American tribes. As much as 85 per cent of coal extracted from federal land comes from the Powder River Basin, which stretches across parts of Montana and Wyoming states. The Northern Cheyenne tribe along with ranchers in the Basin are suing the Department of Interior over concerns that lifting the moratorium will pollute the water. If the plaintiffs lose their suit and mining on federal land proceeds, protest action is likely. In March 2016, Arch Coal announced it would not build the Otter Creek mine in Montana, which was slated to be one of the largest coalmines in North America, after years of protest from local communities. In 2014 and 2015, protesters blocked railroad tracks preventing freight carrying coal from entering Missoula, Montana. Similar protests in the Powder River Basin could disrupt planned mining activity and coal transport. Read the full article