Trump’s year in coal, not so good

On Jan. 11, Luminant Generation shut down the 1,100-MW Sandow coal-fired power plant near Austin, Texas. On Jan. 12, the Federal Energy Regulatory Commission turned down a request from Ohio’s FirstEnergy to transfer the 1,300-MW Pleasants Power Station from the company’s merchant generating arm to its regulated utilities Monm Power and Potomac Edison.

Both actions came as Donald Trump, who campaigned for president in 2016 by claiming he would rescue the troubled U.S. coal industry and bring back jobs for coal miners, was completing his first year in office. How has Trump fulfilled those campaign promises so far?

The two actions last week are emblematic of how market realities are rendering Trumps’ bluster hollow. The coal industry continues to struggle in the face of market truths that easy campaign promises can’t dent. Electricity demand is not growing enough to support large baseload plants amid continued low natural gas prices. The federal environmental regulatory hurdles Trump falsely claimed were killing coal have had little to do with the closures.

The biggest step the administration took during the year was the Department of Energy’s harebrained scheme to kill the competitive wholesale markets that set electricity prices for more than half of the U.S. in order to subsidize coal and nuclear plants. The same week as the Sandow closure and the failure of FirstEnergy’s game of musical power plants, the Federal Energy Regulatory Commission unanimously rejected Energy Secretary Rick Perry’s plan. All four of Trump’s FERC appointees, along with holdover Cheryl LaFleur, turned thumbs down on the plan.

Robert Murray

Murray Energy coal boss Robert Murray, who, it was widely reported, came up with the basics of the failed Perry ploy, was apoplectic at the FERC action. CNN Money reported that Murray said in an interview, “Mr. Trump’s administration made some bad appointments to this commission,” adding, “The bureaucrats appointed by Mr. Trump and the one already there have failed to carry out their obligations during this crisis.”

A more realistic view of the coal industry comes from a new report by the Rhodium Group – “The Year in Coal” – which found “that while US production did recover slightly, it had nothing to do with a change in federal policy. In fact, according to new Rhodium Group estimates, domestic coal consumption continued to decline last year. The growth in US output was due entirely to higher export demand and slower inventory draws.”

The most dismal aspect of the Rhodium report is domestic coal consumption. “US coal consumption declined by 2.4% in 2017,” said the report, “falling to its lowest level since 1982. Demand was running above 2016 levels in the first half of the year due to higher natural gas prices, but plummeted during the third and fourth quarters, falling 9% and 7% year-on-year respectively.” The Rhodium Group is a New York-based management consulting firm.

One of the most disheartening aspects of the year in coal comes in a long report from Reuters last November, headlined “Awaiting Trump’s coal comeback, miners reject retraining.” Reporter Valerie Volcovici traveled around southwestern Pennsylvania coal country looking at why a wide array of job training programs aren’t thriving. The general conclusion: the miners think coal is coming back. It’s a job they know, that employed their fathers and grandfathers, and they believe in wishes over reality.

Coal mining jobs are not coming back in any significant way. The coal industry’s U.S. market is slipping badly, mines have become much more productive, using fewer miners, and the coal industry now has fewer workers than the Arby’s fast food chain.

But there are jobs out there in new industries, as Pittsburgh found out when the U.S. steel industry collapsed. Pittsburgh is now built on education and health care and is more prosperous than ever.

But the miners’ belief in Trump’s fantasies is producing a “Catch 22” situation, as Reuters’ Volcovici observes. “Coal miners are resisting retraining without ready jobs from new industries, but new companies are unlikely to move here without a trained workforce,” Volcovici writes. “The stalled diversification push leaves some of the nation’s poorest areas with no clear path to prosperity.”

In southwestern Pennsylvania, the uptick in production driven by foreign demand for metallurgical coal has fueled the cargo cult fantasy that coal is coming back. The area has copious met coal deposits, which is why Pittsburgh became the iron and steel city of the 19th and 20th centuries. But thermal coal for power plants is the industry’s backbone, and that’s a declining market under the best of circumstances.

— Kennedy Maize