Much is made of President Obama’s and the Environmental Protection Agency’s “war on coal”. And it’s true. In order to reduce air pollution and retard global warming, this administration, along with the governments of nearly all industrialized nations, is trying to reduce the burning of coal for the generation of electricity.
But, how much of a difference are the president’s policies making on the amount of coal that’s mined and on the number of jobs in the mining and power generation industries? In fact, let’s ask the big question. If this president is swept from office in November and the EPA’s power to regulate carbon dioxide emissions is removed, as presumed Republican challenger, Mitt Romney, has said he would do, what would it mean for America’s coal industry?
Would there be a rebirth? Would coal-burning power plants that are currently slated for closing become viable again? Would new coal-burning power plants be built to meet the growing demand for electricity? Would mines that have been closed be reopened? And would there be a rebound in hiring creating thousands of new jobs in the mining industry?
If you believe that the answer to any of these questions is, yes, you haven’t been paying attention to the market forces that, far more than government action, are killing coal in general and the Appalachian coal industry in particular.
What are those market forces? First, there is natural gas.
If the Obama administration is conducting a “war” on coal, then the English language hasn’t invented a word of sufficient ferocity to describe the conflict between coal and natural gas. Although West Virginia politicians are loath to admit it, every new gas well that’s sunk in West Virginia is another nail in the coffin of coal. Why?
The practice of fracking has greatly increased supplies of natural gas and reduced the price to the point that it costs only half as much to generate a megawatt of electricity from natural gas as from coal half as much.
That’s warfare. And, in case you’re under the delusion that the competition between coal and gas is friendly, consider that between 2007 and 2010 Aubrey McClendon, CEO of Chesapeake Energy, the largest gas driller in West Virginia, donated $26 million to the Sierra Club’s campaign to block the construction of coal-fired power plants. Just last month McClendon did a victory dance when a Wall Street Journal writer asked him about his reputation as “the scourge of coal”. McClendon said, “I probably am not as strident as I used to be because I don’t have to be. Natural gas has won in the marketplace and it is continuing to win.”
Far more than the president’s “war on coal”, the natural gas industry’s war has had measurable effects. Last year the amount of the nation’s electricity generated by coal dropped by 8.9 percent and coal is now responsible for less than 40 percent of the electricity generated in the US. This was partially attributable to warmer-than-average winter weather, but the bigger factor was natural gas which saw its volume grow by 7.2 percent.
And natural gas’s price advantage isn’t going away anytime soon. One of the reasons gas is so cheap is that the “wet gas” found in many of the Marcellus shale wells in West Virginia, also produces byproducts such as ethane, which is used in the plastics industry. At current prices, these byproducts almost double the value of natural gas. Economically this functions as a subsidy for which coal has no answer.
The second market force crushing coal in Appalachia is cost. The volume of Appalachian coal produced per miner dropped by 25 percent between 2001 and 2008. This decline in productivity is driven by the exhaustion of easily accessible coal seams and produces higher costs and reduced competitiveness in the face of the onslaught by natural gas.
The third market force killing coal is the American people.
In its April issue, Mother Jones magazine ran a story by Mark Hertsgaard documenting the virtual moratorium that has fallen upon the construction of new coal-fired power plants, particularly in the eastern part of the country. While there are just over 30 new coal-fired plants currently under construction in the US, more than 160 have been blocked often by local residents who don’t want what they perceive as a dirty industry in their back yards. The look not only at the global warming impact of coal burning, but at its effect on health as measured in elevated levels of asthma attacks and death.
By the end of the decade these combined market forces will have produced almost twice as much of a reduction in carbon emissions as would have been achieved under the proposed (and, in West Virginia, the much-reviled) cap and trade legislation that died in 2010.
Does that mean that Obama administration actions on coal are irrelevant or superfluous? Not altogether. Clean-air regulations are causing some older coal-fired power plants to be taken offline sooner than they otherwise would be because it’s not worth the cost to retrofit them with pollution control equipment. However, this is only slightly speeding up the inevitable. Those plants, like the coal industry as a whole, are dead men walking, not because of government action, but because of the free market. And the question for West Virginia’s political leaders is whether they will finally focus on building a post-coal economy rather than trying to postpone the inevitable.
– Sean O’Leary can be reached at email@example.com.