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Trump victory invigorates coal industry

09 Nov 2016 19:54 GMT
Trump victory invigorates coal industry

Washington, 9 November (Argus) — Donald Trump's surprise victory in the 8 November presidential election has invigorated a battered US coal industry that now sees a real chance to block what producers view as detrimental energy and climate policies advanced by President Barack Obama.

Trump, a Republican, has vowed to advance an "America First" energy plan that will expand the US's role as a producer of coal, oil and gas. To revitalize the US coal sector in particular, he has promised to gut the Environmental Protection Agency's (EPA) Clean Power Plan, eliminate the Interior Department's moratorium on federal coal leasing and invest in clean coal technology. The president-elect will have ample opportunity to pursue these goals, since his agenda likely will be supported by Republican majorities in the House and the Senate.

Not everyone is convinced that a major US coal market turnaround will follow. But coal company stock prices soared today, and producers and industry associations praised Trump's victory over Democrat Hillary Clinton.

Trump's election is "a great day for America," Murray Energy chief executive Bob Murray said. Coal associations and other industry executives agreed.

The Pennsylvania Coal Alliance said it "firmly supports … Trump's commitment to eliminate unnecessary regulations that have restricted the growth and competitiveness" of the sector.

Just a few weeks ago as Clinton led most election polls, industry members were bracing for another Democratic administration, which would likely have solidified President Barack Obama's regulatory agenda. Clinton had vowed to defend the Clean Power Plan, meant to reduce CO2 emissions from power plants, and to work to help the US comply with the Paris climate accord reached last December.

But now that Trump is poised to take office in January, all of Obama's initiatives are on the table.

Trump "is not going to dismantle the EPA, but he is going to substantially reduce its influence and power," said James Van Nostrand, director of the Center for Energy and Sustainable Development at West Virginia University.

The new president will be able to appoint new administrators of key regulatory agencies who are likely to be more sympathetic to fossil fuel interests.

"There are very few people in the coal industry who will miss (EPA administrator) Gina McCarthy," Armstrong Energy executive chairman Hord Armstrong said today. He also heralded the potential of a new leader of the US Mine Safety and Health Administration.

Dismantling the Clean Power Plan, which is currently before a federal appeals court, was one of Trump's biggest election promises to fossil fuels interests. He could do this by refusing to defend the rule in court, initiating a rulemaking to revise it, or rendering the plan "toothless" by failing to implement it, Competitive Enterprise Institute (CEI) senior fellow William Yeatman said. CEI's energy and environment director Myron Ebell is expected to head Trump's EPA transition team.

Allocating resources away from defending the plan is possibly the most politically appealing because it eliminates the uncertainty of a court decision and places it back in the hands of the president, Yeatman said.

At least some of the concern about the court system was also alleviated by yesterday's election result. The industry expects Trump to advance a conservative nominee to fill Supreme Court justice Antonin Scalia's seat.

Refusing to defend a previous administration's regulations is not without precedent. The Obama administration took a similar tack with changes to the stream buffer zone rule that George W. Bush's administration released shortly before he left office. After seven years of effort, the Interior Department's Office of Surface Mining Reclamation and Enforcement submitted its final rule tightening the standards earlier this year. If the rule is published before Obama leaves office, Trump may dismantle it.

The coal industry is tracking the fate of other regulations including the EPA and Army Corps of Engineers' Waters of the US rule, which expands the number of water bodies under federal regulatory purview.

But while Trump's election will likely help lift some of the pressure on the industry, it may not usher in a complete turnaround. Utilities have retired 65GW of coal-fired capacity since the start of this decade, largely to comply with new EPA rules that have already been finalized, according to a database of retirements kept by Argus.

The build out in natural gas and renewables generation has also taken a toll on coal, particularly when gas prices are low. Coal consumption for electricity generation fell to 740.9mn short tons (672.1mn metric tonnes) in 2015, an almost 29pc decline from 1.04bn st a decade earlier, according to US Energy Information Administration data. Natural gas consumption rose by 66.5pc over the same period.

"EPA is not the problem, cheap natural gas is the problem," Van Nostrand said. Many power plants that have converted to use natural gas are unlikely to switch back.

The industry may be able to eventually combat some coal-to-gas switching if Trump and Republican legislators follow through on promises to invest in clean coal technology. With a unified executive and legislative branch, previously unsuccessful efforts to throw the coal industry a lifeline may take hold.

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