Earlier this month, Bank of America became the latest large financial institution to announce it would limit its financing of coal companies.
The move stemmed from concerns about climate change and regulatory factors that make investing in the industry more risky. The new approach to coal companies was pushed by environmental groups such as the Rainforest Action Network. But in Kentucky, the head of the coal association said the policy would likely have little practical impact on the coal industry.
“I think when you consider the challenges we’re facing in the coal industry in Kentucky, access to capital is really not one of those challenges,” Bill Bissett said.
There are fewer coal miners employed now in Kentucky than any year since regulators started counting in 1927, and production in Eastern Kentucky is at the lowest level since 1965. The downturn is due to a number of factors, including low natural gas prices, cheaper coal in the Illinois Basin and out west, increased environmental regulations and declining reserves. But Bissett said coal companies looking for financing can still find it.
James Stevenson of IHS Global Insight agreed. He said in Appalachia, the majority of smaller coal companies aren’t borrowing from the large financial institutions like Bank of America. Instead, they’re getting money from smaller banks, which then in turn might borrow from larger banks.
But Stevenson said some bank policies did have an effect on the industry. Beginning in 2010,large banks began to pull away from financing mountaintop removal mining. The practice has declined in Appalachia since then, though there are a number of other market and regulatory factors that have contributed to the decline.
