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Despite Trump's Promises, Coal Industry Rebound In Appalachia Remains Unlikely

Over the past year, President-elect Donald Trump has had a lot to say about energy.

As he campaigned around the country promising to "make America great again," he also told people in Kentucky, West Virginia, Pennsylvania and Ohio that he would make coal great again, too. A Trump presidency, he promised, would oversee a resurgence of coal mining and burning.

But despite the hopes of the coal industry and Trump’s plans to repeal environmental regulations like the Clean Power Plan, experts say a massive rebound is unlikely.

For an energy source that powers an ever smaller amount of the country’s electricity — about a third last year — and employs fewer and fewer Americans — about 9,500 in Kentucky in 2015 — coal played an outsized role in this year’s presidential race.

Campaigning in Louisville earlier this year, Trump echoed the mainstream Republican rhetoric blaming the coal industry’s woes on President Barack Obama.

“Obama has decimated the coal industry, decimated it, and we’re going to bring the coal industry back, folks,” he said to cheers from the crowd. “We’re going to bring it back.”

Rather than treat coal’s decline as inevitable and discussing economic diversification in coal country, Trump argued he would revive the industry.

“Look, the coal industry is going to make a very big comeback, OK? I’m telling you,” he told the crowd.

That message resonated with voters -- and with industry representatives. Trump was endorsed by the West Virginia Coal Association. When he won, industry groups like the National Mining Association and the American Coalition for Clean Coal Electricitysent out optimistic statements.

And the markets rallied. The Hill reported Peabody Energy stocks were up Wednesday as much as 59 percent over Tuesday’s close, while Cloud Peak, Arch Coal and Consol Energy also jumped.

The industry’s wish list includes scrapping regulations like the Stream Protection Rule and the Clean Power Plan, as well as slashing spending and personnel at the Environmental Protection Agency and the Mine Safety and Health Administration.

Environmental groups are already mobilizing to fight any reduction in regulations, which they say will harm the country's air and water and derail any progress made on climate change. But from a purely economic perspective, an analysis by investment firm FBR concludes Trump’s policies could boost the nation’s coal industry long-term, though notes that short-term, the main factors influencing the lag are low natural gas prices and weather.

Although potential regulatory changes might help spur coal production in some areas of the country, experts remain pessimistic about Appalachian coal.

Supply and Demand

The demand for Appalachian coal in American power plants is decreasing — and a lot of that is due to infrastructure changes that won’t be reversed just because Trump is in the White House.

The market for Kentucky coal has been steadily shrinking over the past few years, as utilities have made business decisions to retire older coal-fired units and switch others to natural gas. Coal from Eastern Kentucky — as well as West Virginia — is typically more difficult and expensive to mine than coal from the Illinois or Powder River basins.

As recently as 2012, 127 U.S. power plants burned more than 68.5 million tons of Kentucky coal. Just three years later, only 101 power plants bought 49.9 million tons of Kentucky coal. And the demand is expected to decline even more over the next few years. Utility companies have announced that 21 of those power plants will either be shut down, partially shut down or converted to natural gas by 2022.

These are long-term planning decisions that have already been set in motion, and the repeal of regulations is unlikely to have much of an effect.

Even eliminating or weakening the Obama administration’s Clean Power Plan — the carbon dioxide regulations that have been vilified throughout the coalfields — likely won’t have much of an impact here.

West Virginia University law professor James Van Nostrand said he doesn’t see either the CPP or other air regulations as the main reason for the decline in coal-fired power plants.

“It’s cheap natural gas. It’s hydraulic fracturing and horizontal drilling that have resulted in mass quantities of natural gas, forecasted to result in low prices for the foreseeable future,” he said. “And that has resulted in substantial displacement of coal-fired generation for natural gas-fired generation. And there’s nothing you can do at the EPA that’s going to change that economic driver.”

And while some of Kentucky’s thousands of out-of-work coal miners may have been pinning their hopes of employment on a Trump win, one of Trump’s most vocal industry supporters has more tempered expectations.

Bob Murray of Murray Energy told S&P Global Market Intelligence he expects Trump’s policies to slow the industry’s decline but not produce a miraculous rebound.
Despite the positive response from the sector over a Trump win, the coal industry is unlikely to spring back to where it was a few years ago anytime soon. Murray said "coal will never come back to where it was" when it provided over half of the nation's power, but it could hover near a 30 percent share instead of going further down, to 18 percent if the Clean Power Plan is not repealed.
Luke Popovich of the National Mining Association said a reasonable hope is that a Trump presidency will help coal maintain its current market share.

"But that said, we also need to have a level playing field," Popovich said. "So this transition can be conducted in an orderly fashion without the government stepping into the ring against us and forcing us to fight essentially two combatants, both our energy competitors as well as our own government."

But in removing some of Obama's regulations, there's a chance the Trump administration will give natural gas yet another leg up on coal.

Although he said there are ways natural gas and coal can thrive together, WVU's James Van Nostrand added that Trump has also promised to eliminate an EPA proposal to curb methane emissions from oil and natural gas drilling operations. This move, he said, would ultimately give natural gas another competitive advantage against coal and make an industry comeback even less likely.

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