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Coal's Steady Comeback

 

 

April 19, 2017 - While good news for coal country has been hard to come by in recent years, new developments could be changing the outlook for the industry. Buoyed by the election of a new administration and the prospect of regulatory changes, there is a degree of optimism about the direction of American coal.


The optimism about coal’s future has also been lifted by the emergence from bankruptcy of Peabody Energy, the largest U.S. mining company. Peabody Chief Executive Officer Glenn Kellow credits President Trump for taking action to declare the importance of coal to the U.S. energy mix. Kellow says the administration’s policies may actually postpone the closure of up to 50 gigawatts of coal-fired power plant capacity.


Competition from inexpensive natural gas and increased regulations on the industry caused coal production in the U.S. to drop by nearly 40 percent under President Barrack Obama. In his first months in office, President Trump has already begun reversing some of the regulations on coal, including rolling back the EPA’s Clean Power Plan and lifting a moratorium on mining on federal land. The President has also promised to bring back coal jobs, although some in the mining industry remain skeptical.


“It’s not going to bring back jobs right away,” Robert Murray, the CEO of miner Murray Energy Corp., said of Trump’s initiatives in an interview last month.


A medium-term outlook seems somewhat optimistic, though. According to the U.S. Energy Information Administration, coal production increased by almost 35 percent in the third quarter of 2016 and is expected to have grown even more in the fourth quarter, although figures won’t be published until next month.The increases in production should lead to a growth in coal jobs, as many of the 33,000 people who lost their jobs between 2014 and 2016 are expected to be hired back.


More good news for the coal industry is that natural gas production has been falling steadily over the past year and prices have been steadily increasing, making coal more cost-competitive. Power producers have responded in some cases by switching back to using coal instead of gas. In fact, coal fired power plants operated 59 percent of the time in January 2017 compared with 56 percent the previous January. Exports of coal also increased in the fourth quarter of last year to 19.3 million tons, up from 12.6 in the third quarter. That’s the highest level since 2015.

 

The coal industry still faces many obstacles, but recent developments have left many feeling more optimistic than they have in years. Hopefully, this important industry continues its comeback, as coal-fired power production will remain a vital part of the world’s energy mix for years to come.