After a Series of Court Wins, the Question Remains: Can President Trump Bring Back Coal?

 

 

By Robert Walton

May 8, 2017 - On successive days last month, the U.S. Court of Appeals for the District of Columbia Circuit handed President Trump procedural victories in his quest to roll back environmental rules. The court delayed oral arguments over regulations on mercury and other harmful emissions from coal plants, and granted a 60-day pause in litigation on the Clean Power Plan.

The White House has systematically been following through on pledges to undo Obama-era regulations, with an eye towards reviving the coal industry. But even if the administration succeeds in significantly rolling back restrictions on fossil fuel energy production, there is a growing belief that it will do little to stem the long-term decline of the industry.

“If gas prices stay low, it's game-over for coal," said Peter Marsters, a research analyst for Rhodium Group.

Marsters recently helped author a study that modeled the impacts of Trump's executive order directing agencies to roll back federal regulations and restrictions. Titled "Can Coal Make a Comeback?," the short answer is probably not. A slight uptick in coal production is possible, but even that depends on the price of gas and the long-term outlook is still dim.

"While there won't be a comeback, it will still be a major fuel source in the United States," said Marsters. "But the story that the industry has been artificially depressed by policy ... that story, we don't find it to be true."

According to the study, published by the Center on Global Energy Policy at Columbia University, competition from cheap natural gas accounts for 49% of the decline of coal consumption. Lower demand accounts for 26% of the decline, and renewable energy is responsible for about 18%. 

"Environmental regulations have played a role in the switch from coal to natural gas and renewables in U.S. electricity supply by accelerating coal plant retirements, but were a significantly smaller factor than recent natural gas and renewable energy cost reductions," the report concludes.

There are also global market forces at play: prices have fallen as Chinese demand for metallurgical coal has waned. While some expect a resurgence, particularly from India, researchers warned that "more than half of the decline in U.S. coal company revenue between 2011 and 2015 was due to international factors."

And there are signs that Trump could actually make matters worse: the White House's tariff on Canadian softwood lumber resulted in British Columbia Premier Christy Clark calling for a ban on thermal coal shipments from the province's ports.

Uncertainty at the D.C. Circuit

The Trump administration has convinced the Circuit Court to grant delays not just in the CPP and MATS case, but also to delay litigation over tighter smog rules. It's not yet clear how the White House intends to proceed, but revising, replacing or rescinding the rules are all options, according to the federal government's requests.

While the policy-reversal is creating long-term uncertainty in the industry, however, the practical and immediate impacts are more muted.

Many coal facilities have already complied with or shut down because of the MATS rule. And the Clean Power Plan has been stayed for more than a year now by the U.S. Supreme Court. The rule had been set to go into effect in 2022, targeting 32% reduction in greenhouse gas emissions, but was delayed while the case was litigated.

 

"As a practical matter, the [CPP] decision has little impact on the states," said Kevin Johnson, a partner at law firm Stoel Rives who advises on energy issues.

Most states squared off over the rule in court: New York led a coalition of 18 defending the rule back in 2015 against more than two dozen states opposing it in a variety of legal challenges. While many states continued to work on compliance, even as the issues became entrenched in court, Johnson said that over time those efforts have been halted.

Whether they supported or opposed the rule, "most, if not all, states have ceased working on implementation of the CPP as currently promulgated -- either due to the stay issued by the U.S. Supreme Court last year, the outcome of the presidential election, or the president’s recent executive order on climate matters," he explained in an email.·And most liberal states have renewable energy or climate goals that surpass the Clean Power Plan.

If the Circuit Court decides to remand the Clean Power Plan back to the EPA, "it would likely end the litigation with no decision on the original case issued, and no subsequent action at the U.S. Supreme Court," Johnson said.

Ari Peskoe, senior fellow in electricity law at the Harvard Law School Environmental Law Program Policy Initiative, said the court's decision in the Clean Power Plan case — to grant a 60-day stay while requesting additional briefs — may not have been what either side was hoping for.

"I’m not sure that any party asked specifically for any of this," said Peskoe. The federal government had requested an indefinite delay, while supporters of the rule pressed for a decision as soon as possible.

In their filing last month, asking the Circuit to continue the case, 24 states and cities argued EPA failed to give sufficient reason for its "unprecedented request for an open-ended abeyance at this late stage of litigation." Significant work has been done on the CPP case, including a full day of en banc hearings at the D.C. circuit, while no hearings have been held in the MATS case. That could explain the decision to hold MATS in abeyance indefinitely, said Peskoe.

Supplemental briefs for the CPP case are due to the court on May 15.

"It’s not clear which issue may have motivated the court to hold the case in abeyance for 60 days, or what they hope to learn from additional briefing or whether EPA will formally propose any substantive action on the CPP in the next month," Peskoe said.

The Outlook for Coal

So what happens if the White House is successful in eliminating these rules?

According to the Columbia study, that "could stem the recent decline in US coal consumption, but only if natural gas prices increase going forward." But if gas prices remain low, or renewable costs fall more quickly than expected, "coal consumption will continue its decline despite Trump’s aggressive rollback of Obama-era regulations."

"There's very little [Trump] can do," said Marsters. "Short of intervening in the market somehow, it's kind of a fundamental issue."

 

According to John Beaty, general manager of Avalara Excise, states will continue to grow clean energy resources for economic reasons.

"A big reason for this shift is the pressure stemming from large corporations that want to reduce their carbon footprint and are selecting locations to conduct business based upon availability of clean energy options," he said. "Even though the Obama administration passed the Clean Power Plan, and now President Trump has stated that he wants to have this plan dismantled, companies are still applying pressure for clean energy alternatives."

Coal plants which have already gone offline were the least-efficient or were out of compliance with environmental rules. The "low-hanging fruit," essentially. But some coal capacity will remain a part of the U.S. power mix for decades.

"You're kind of paring them down to the cheapest, the coal plants most likely to run, and those will be the hardest ones to get out of the market," Marsters said.

The study concluded that under a "best case scenario" for U.S. coal producers, production could recover to about 2013 levels, just under 1 billion tons annually, while on the other end output could fall to 600 million tons a year.

 

Plausible ranges for domestic coal mining employment range from 70,000 to 90,000 in 2020, and 64,000 to 94,000 in 2025 and 2030, "lower than anything the US experienced before 2015," researchers concluded. "President Trump’s efforts to roll back environmental regulations will not materially improve economic conditions in America’s coal communities."