Helping Coal

The Trump Administration has taken a set of aggressive steps to help re-invigorate the nation’s coal industry through the relaxation of regulations.

Helping “coal country,” especially helping the coal miners and their communities, is a praise-worthy goal. I am not sure, however, that the announced measures can achieve the intended goals.

Coal became the predominant fuel for electric power largely because of its low cost. Natural gas now competes quite effectively on price with coal in United States markets. Unless there is a major fatal earthquake proven to be caused by hydraulic fracturing for oil or gas, coal will not regain its price advantage in our lifetimes.

Marginal fuel price economics, plus the uncertainty that would accompany any new coal projects in the U.S., strongly indicates that financial institutions will be hesitant to invest in new coal supply chain assets.

Whatever the status of the Clean Power Plan (CPP), the odds are high that many states will retain renewable portfolio standards (RPSs). These standards negatively affect coal power finances in at least two ways. Mandated renewable power backs out base load requirements, such as coal baseload plants. This backing out of generation, plus the lowering of market-clearing prices through renewables plus natural gas (typically the marginal supply) have adversely affected the overall revenue outlooks for all baseload supplies, notably coal and nuclear plants.

Given these negative pressures for coal, changing the CPP and even federal leasing rules appear unlikely to have adequate effects on the revenue outlooks for coal use to increase in any significant way. And even if coal use were to grow, autonomous machines and subterranean robots are likely to take many of the jobs now performed by miners.

Thus, the key to helping coal country is to help miners find new careers and help the supporting communities shift as well. When the nation prepared for synthetic fuels, community-related support was an integral part of the policy formulation processes. Now, we should be planning for the shift from coal mining to other needed activities. Some success has been achieved, such as helping coal miners learn computer coding. This is a potentially powerful concept. What miner would not wish for his child to be able to leap to a 21st century career instead of struggling in a struggling industry?  

The Pennsylvania Small Business Development Centers (SBDCs) at Wharton and the Kleinman Center for Energy Policy have partnered on a federal POWER grant to identify strategies to assist businesses and communities impacted by changes in Pennsylvania’s coal economy. The joint initiative includes research, outreach to stakeholders, stakeholder meetings in coal communities and with policymakers, and will culminate in a final report.  Penn’s Kleinman Center has also issued a report surveying strategies being used in other states to assist distressed coal communities.

The billions of dollars that have been burned on clean coal technology development that we know will not be economically viable could have been more effectively applied to coal community transitions.  We should be able to “do right” for the coal communities in this country. They played major roles as the U.S. developed its modern leadership. It is our duty to help these communities return to the positive contributors they once were before they were pushed into dependency on others—a situation they proudly consider unacceptable.

William Hederman

Independent Senior Adviser, Deloitte and Touche
William Hederman is a former senior fellow at the Kleinman Center and Independent Senior Adviser at Deloitte and Touche.