Market Forces, Not Regulations, Have Dethroned 'King Coal'

Market Forces, Not Regulations, Have Dethroned 'King Coal'
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The fact that the sixth-largest coal company in the United States is in bankruptcy demonstrates that King Coal has been de-throned not because of environmental regulations, but because it is simply less efficient. This is a case of the market rendering its judgment, not the regulator.

Westmoreland Coal, which owns 19 mines in six states and Canada, has found it necessary to seek to cut retiree health insurance and pensions in the face of a $1.4 billion debt. The collapse of the faltering company, which employs 3,000 people, would further the steady decades-long decline of the coal industry and its workforce. Westmoreland is among several coal companies that have in the past two years filed for bankruptcy protection, or continue to struggle as natural gas and renewable energy sources have increasingly become more economical.

Many have tried to blame tougher environmental regulations embraced by the Obama Administration for the collapse of coal. But coal consumption has been declining in the United States for 40 years.

A report in December by the Energy Information Administration found that Americans are consuming less coal than at any time since the late 1970s. The EIA report also stated that 2018 saw the second-largest number of coal-fired plants shutting down.

The Trump Administration has promised to bring back the coal industry. But federal government figures show that market forces have been inexorably ramping down demand for it. Coal consumption by the country’s power grid declined 4 percent in 2018, and will fall another 8 percent this year, the EIA estimated. This decline comes in spite of the abolition of President Obama’s clean power plan, which would have spurred electrical suppliers to turn away from coal-fired plants to other forms of energy such as natural gas. The move from coal has even driven Energy Secretary Rick Perry to urge a shift to development of natural gas and petrochemical industries in Appalachian coal country.

The decline of the traditional coal industry has prompted the rise of new clean coal processes. They encompass several methodologies - including gasification and improved technologies for treating flue to remove pollutants - all of which are expensive.

Probably the most popular is carbon capture and sequestration. The process can facilitate the capture of up to 90 percent of the carbon emissions produced from burning fossil fuels. But the price is high. Building new plants with carbon capture capacity or retrofitting old ones is costly. An analysis by Forbes indicates that coal plants equipped with carbon capture and sequestration capacity are nearly three times more expensive than onshore wind power and more than twice as expensive as solar. Equipping plants to capture and sequester carbon requires additional equipment, increased upfront construction costs, additional operations and maintenance expenses, pipeline construction to transport the carbon underground, and inspection and site monitoring.

Since a considerable amount of energy is required to extract, pump and compress carbon emissions, a carbon capture and sequestration equipped plant must also purchase and burn more fuel to produce similar levels of electricity.

Although these costs will no doubt decline with additional research and development, the potential for cost improvement is limited.

The coal industry is caught between the rock of declining sales and the hard place of expensive investment in new technology. Meanwhile, it can only watch as other energy forms grow. Westmoreland is not the first coal company to find it’s in rocky seas, nor will it be the last.

Allan Golombek is a Senior Director at the White House Writers Group. 

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