By James Clad

May 31, 2016 - National discussion about coal’s place in our future energy mix usually descends into disdain or (in places where coal delivers significant employment and state revenue) summons devoted defenders. But there is a golden mean: Coal still has a place – but not the one the industry seeks longingly in the rear-view mirror.

In halcyon days, coal heated homes and shops, generating also most of our electricity. Coal fueled heavy industry, making the U.S. the world’s leading manufacturer and its pre-eminent military power. In the 19th and 20th centuries, coal provided our first energy surge.

But that was then. Today, coal faces a lot more than just regulation-happy governments. Apart from air and water pollution issues, coal must contend with a basic choice-of-fuels problem in which it’s on the wrong side of the price trend. This means coal’s large profile in state finances will also fade, the fiscal side of the coal slide.

In commodity terms, over-dependence on single resource revenue afflicts both Wyoming (coal) and Saudi Arabia (oil). It’s just a matter of degree. Now the Saudis – and the United Arab Emirates – are moving away from this dependence. They’ve made huge investments in recent months to diversify their economy and prepare for a post-fossil fuel era. While emulating Saudi Arabia is a rare argument, America’s coal states should also reduce fiscal risks of their own “resource curse.”

It’s no good blaming “environmentalists” for coal’s demise. Yes, anti-coal campaigns have impact. Yes, new regulations have added more pressure. Yet coal still generated forty percent of U.S. electricity five years ago, and exports of the stuff reached a zenith three years ago.

Something else is happening. Cleaner burning, cheaper natural gas now poses insurmountable competition. Natural gas is generating more electricity than coal, accelerating a drop in carbon emissions. With abundant natural gas from the shale revolution, U.S. emissions are falling faster than those of any other country. Electricity costs continue to fall in most states.

Some say cheap natural gas cannot continue. They point to past price spikes. But shale extraction techniques since the mid-2000s have unlocked a resource so vast that many old rules just don’t apply anymore. Despite growing power plant use, and nascent but expanding exports, natural gas prices remain stubbornly low.

Sudden price jumps seem unlikely to rescue coal, therefore, the use of which seems in permanent retreat. Literally hundreds of coal-fired power plants are being retired this decade. New natural gas plants using efficient turbines are taking their place, along with solar and wind facilities. Conversely, not a single new coal plant is planned in the U.S.

Coal remains central to some regions’ economic life. In their current market travail, coal companies yearn for a lifeline, some even pushing for tax or regulation rollbacks. Like Montana and West Virginia, Wyoming fears the fiscal impact of coal’s retreat; coal production gives revenues of about $1 billion annually to Wyoming.

Global experience shows the risks of heavy reliance on a single commodity. Now styled as “energy companies,” mega firms like Shell and ExxonMobil are adding a growing portfolio of non-conventional business. Meanwhile, even Persian Gulf emirs sense a looming time when oil no longer holds sway. In a world of computers, who wants to be a typewriter manufacturer?

Coal will continue as both baseload supplier and peak load backup. But not as before. For America’s coal-revenue dependent states, new regulations, innovation and market forces have put the writing on the wall.

James Clad, formerly a U.S. deputy assistant secretary of defense, is an international energy consultant based in Washington, D.C.