Who’s Responsible for Coal’s Decline?
Before Murray Energy’s Chief Executive released 156 people from his Ohio-based coal operations, he blamed the Obama administration’s “war on coal.” He went on to say a public prayer, bemoaning that America’s young people would not know the country in which he grew up.
But what Robert E. Murray failed to mention is that the federal regulations started by the 1990 Clean Air Act under President George Bush I are only part of the mosaic. The other parts include a dark recession that repressed electricity demand along with a boom in unconventional natural gas, or shale gas. And he did not mention that he has been a fierce partisan, able to give some $1.4 million in contributions since 2007, say news reports.
“My regret, Lord, is that our young people, including those in my own family, never will know what America was like or might have been,” Murray says, in a publicly released prayer published by the Washington Post. “They will pay the price in their reduced standard of living and, most especially, reduced freedom.”
Murray, who employs roughly 3,000 people and produces about 30 million tons of bituminous coal a year, according to the Post story, is most assuredly dealing with a White House that favors cleaner energies. But, from the vantage point of the Obama administration and its supporters, regulators are carrying out the will of lawmakers who passed legislation signed by the elder Bush in 1990. Recently, though, carbon dioxide was included as an emission under that law.
Sadly, Patriot Coal Co. filed for bankruptcy in July. Meantime, Alpha Natural Resources has said it will stop production at four Kentucky-based mines while laying off 150 employees. The major coal companies, which also include Peabody Energy, Console Energy and Walter Energy, took hits to their stock values a day after the election.
“A regulatory environment that puts coal at a disadvantage along with low natural gas prices have led many utilities to increase or accelerate their scheduled coal-plant retirements,” says Anna Zubets-Anderson, an analyst with Moody’s Investor Services that has a “negative” outlook for the coal sector. “In addition, newly proposed U.S. carbon dioxide regulations would effectively prohibit new coal plants by requiring new projects to adopt technology that is not yet economically feasible.”
The coal lobby has spent a lot of money trying to beat back some of the regulations by supporting political candidates sympathetic to its cause and by funding legal battles to turn back the regulatory clock. But it has been the onslaught of shale gas development that has stung the worst. Right now, those prices are comparable to coal and they are not expected to rise much in the coming years.
The result has been that coal used for electric generation is falling and is now about 45 percent of that market while natural gas' share is increasing, and fast. It is expected to go from about 25 percent today to as much as half in two decades. In April 2012, the U.S. Energy Information Administration reported that coal and natural gas each supplied 32 percent of the utility market in that month alone.
“Natural gas used to generate power has half the carbon dioxide emissions of conventional coal power generation and near zero sulphur emissions,” says BP’s Energy Outlook. “Gas is expected to displace coal in power generation across the (developed world) due to rising carbon prices, permitting constraints for new plants and mandates.”
But will natural gas prices remain low, which is giving it the boost it needs to win favor among utilities? The basic fundamentals would suggest that such prices will eventually rise. That’s because as more utilities demand natural gas, it would then put upward pressure on prices. It’s especially true if the United States would become a net exporter of that fuel to Asia and to Europe where such prices are much higher than those we pay here.
Richard Goodwin, an energy analyst in Florida, says that natural gas would have to rise to about $6 per million Btus before utilities would consider switching to a different base-load fuel such as coal. At present, the cost is about $3.60 per million Btus.
At some point, that is going to happen. But coal is not the only fuel that wants a greater piece of that pie. So do nuclear, wind and solar. The coal industry will therefore have to invest in new technologies so that it can step it up a notch, and the federal government has shown itself to be a willing participant. It is helping to fund “clean coal” projects by Duke Energy and Southern Company.
Sanctimony won’t help. But coal’s leaders can promote their cause by joining these discussions and becoming part of the solution.
EnergyBiz Insider has been awarded the Gold for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been honored as one of MIN’s Most Intriguing People in Media.