The Black Thunder coal mine owned by Arch Coal, near Wright, Wyoming in the Powder River Basin. Photo by EcoFlight
This report is the result of a collaboration between Appalachian
Voices and the Western Organization of Resource Councils to assess the
effect of Trump Administration policies on economic growth in
coal-producing regions. (Blogger Ann's note: Here is the article link if you would prefer it.)
By Colin Lauderdale & Erin Savage
One year into the Trump administration, the coal industry that the
president promised to revive has shown some muted signs of life.
Nationwide, coal production ticked up last year for the first time since
2014, and the sector added 1,035 jobs — an increase of 1.9%. (A
Reuters analysis
using preliminary data from the Mine Safety and Health Administration
put the number at 771 new coal jobs in 2017.) The administration claims
this uptick as evidence that their anti-regulatory agenda is having its
desired effect.
Unfortunately for Trump and the coal industry, though, 2017 appears
to be an outlier in which coal overperformed. The coal industry’s
fortunes are tied to market demand, not regulatory actions, and the same
factors that have depressed coal demand for the past decade — cheap and
abundant natural gas, air quality concerns, and depleted reserves — are
as present now as when Trump took office.
Many of the administration’s policy actions in 2017 were aimed at
bringing coal jobs back to mining communities. In the name of restoring
these jobs, the administration repealed the Stream Protection Rule,
initiated repeal of the Clean Power Plan, rescinded a moratorium on new
federal coal leases, discontinued a programmatic review of the federal
coal leasing system, repealed a rule closing loopholes in federal coal
royalties, empaneled a committee of fossil fuel advocates to steer
federal mineral royalty policy, announced U.S. withdrawal from the Paris
Climate Accord, and canceled a National Academy of Sciences study of
the health impacts of Mountaintop Removal mining.
Mountaintop removal mine in West Virginia. Photo by Kent Mason
Energy Secretary Rick Perry also brought a rulemaking to the Federal
Energy Regulatory Commission that would have subsidized aging coal-fired
power plants with ratepayer dollars, but the commissioners voted down
the plan unanimously.
These policy decisions have major implications for clean water,
breathable air, public health, taxpayer fairness, fair electricity
markets, and everyone impacted by global climate change. In addition,
the data suggests that these policy actions aren’t likely to reverse the
macroeconomic trends that have been working to depress coal’s value and
market share.
These five graphs illustrate what happened with coal in 2017 and why
the long-term trends in the industry are unlikely to reverse.
1. Production and employment went up, barely
Figure
1. U.S. coal production (million short tons) and employment (thousand
workers) 2002-2017. Source: MSHA Part 50, MSHA Open Government Data
2017 bucked a long-term trend in coal production as coal mining
companies sold more tons of coal and employed more miners than the
previous year. Both increases were marginal, especially considering that
both metrics are about one-third lower today than one decade ago.
The modest recovery in coal production did not lead to a commensurate
recovery in employment. Although coal companies mined and sold about 6%
more coal in 2017 (an additional 40.4 million tons) than the year
before, they only hired back about 2% of their workforce (1,035 jobs).
2. Mines with fewer workers accounted for biggest production increases
Figure
2. Regional production 2002-2017 (million short tons). Regions
represented include the Eastern Interior (E. Interior), Central
Appalachian (CAPP), Northern Appalachian (NAPP), and Powder River Basin
(PRB) coal-producing regions. Data is preliminary for quarter 4, 2017
and production could increase slightly. Source: MSHA Part 50, MSHA Open
Government Data
Almost half the coal mined in the U.S. comes from the Powder River
Basin (PRB) of Wyoming and Montana, where large surface mines and thick
coal seams allow companies to produce coal with fewer workers than mines
in Appalachia and the Illinois Basin. This explains why net gains in
employment in 2017 did not keep pace with net gains in production.
Despite accounting for 51.9% of the increase in U.S. coal production
from the year before, the PRB actually lost about 60 jobs in 2017.
3. Consumption decreased (again)
Figure 3. U.S. coal consumption 2002-2017 (million short tons). 2017 consumption estimated by Rhodium Group analysis. Source: EIA, Rhodium Group.
Despite increases in both production and employment, the long-term
trend of decreasing domestic demand for coal continued in the first year
of the Trump Administration. Last year was the fourth consecutive year
of falling domestic demand and marked a 37% decline from a decade ago.
The continued decline comes from the rolling wave of retirements of
coal-fired power plants, coal-to-gas switching at utilities across the
country, increasing generation from non-hydro renewables, and a complete
lack of new coal-fired electricity generation in the U.S.
This trend is likely to continue. According to the Energy Information Administration,
14 gigawatts
of coal-fired electricity generating capacity are scheduled to come
offline in 2018, with no new coal generation to replace it. The Energy
Department’s short-term energy outlook predicts that 2018 will be the
first year in modern history in which coal provides less than 30% of the
nation’s electricity.
4. Exports made up the difference
Figure 4. U.S. Coal Exports 2002-2017 (million short tons). Source: EIA
If mines produced more coal in 2017, but Americans used less of it,
where did the excess go? The answer is overseas. Last year saw a spike
in coal exports, from 60.3 million short tons to 95 million. In the
first ten months of 2017, exports were up 70% over the same period in
2016.
The spike was driven by rising international prices for metallurgical
coal (used for steel production rather than electricity) that
accompanied strong international economic growth last year.
Metallurgical coal shipments accounted for 43% of coal exports in the
first half of 2017, with most of the economic benefit accruing to West
Virginia producers.
Exports of steam coal for electricity also increased due to seemingly
temporary factors in the Pacific Rim. The Asian market for coal swelled
as China, the world’s largest coal consumer, increased imports while
decreasing domestic production due to safety inspections and closure of
inefficient Chinese mines. U.S. producers were able to grab a portion of
this market after Cyclone Debbie shut down coal mines and railways in
Australia, effectively halting Australian exports that usually crowd out
American coal in the region.
5. Coal companies stopped pursuing 1.97 billion tons of new federal coal leases
Figure
5. Current status of federal coal leases pending before Trump took
office. Leases are considered “paused” when a company has (i) requested
that the Bureau of Land Management (BLM) stop processing the lease, (ii)
failed to provide additional information or payment required for BLM to
process the lease, or (iii) not responded to BLM inquiries about
continuing to process the lease. Source: Bureau of Land Management,
LR2000
Early in 2017, the Trump Administration terminated two policies
implemented by the Obama Administration in January 2016: a top-to-bottom
review of the financial and climate implications of the federal coal
leasing program, and a temporary moratorium on new major federal coal
lease sales. Interior Secretary Ryan Zinke ended both the review and the
moratorium with a Secretarial Order last March, declaring that both had
prevented the coal industry from flourishing.
Coal owned by the federal government accounts for over 40% of U.S.
production. There was almost 2.9 billion tons of federal coal pending
when Trump took office. Since then, only three federal coal lease sales
have occurred, accounting for about 60 million tons, or 2.4% of the
tonnage pending. All three leases would have been allowed under both of
the terminated Obama-era policies.
Almost 70% (1.97 billion tons) of the tonnage pending has been
withdrawn or put on hold by the companies that asked BLM to sell the
coal in the first place. These actions are a clear indication that the
coal industry, at least, doesn’t believe that the minor uptick in
production in 2017 is the beginning of a rebound in coal’s long-term
prospects.
In addition, last year saw one new 640-acre request for a federal
coal lease in North Dakota, as well as relinquishment of a 5,226-acre
parcel previously leased in Wyoming.
Conclusion
Although we share the president’s intention to bring economic
prosperity to coal-producing regions, we believe his strategy of
de-regulating coal mining and burning is unlikely to produce the
forward-looking economic prosperity that coal regions need. The economic
headwinds facing the coal industry are the result of competition from
less expensive energy sources, depleted coal reserves that are more
expensive to mine, growing consumer and business demand for cleaner
sources of energy, and a carbon-constrained world. Until the
administration is able to solve these problems, doubling down on the
economic potential of the coal industry is a poor policy for promoting
economic growth.
Coal communities deserve policies that take advantage of the coal
regions’ existing assets; ensure the strongest possible standards for
reclamation bonds; focus on creating new, sustainable, and diverse local
economies; recognize mine reclamation as an economic opportunity; and
preserve the benefits and respect that coal miners and their families
have earned over generations of hard work powering our country.
Colin Lauderdale is the Washington, DC Representative for the Western Organization of Resource Councils.
