have a dramatic effect in reversing
the fortunes of the coal industry.
Pruitt would have to unravel
many more rules regarding air,
water, emissions, and regulatory
power that have accumulated over
the last eight years to make any
dramatic improvements in the coal
industry’s outlook. But the Trump
administration’s biggest impact
could stem from simply reducing
the EPA’s budget and regulatory
reach capability. Reductions in the
EPA will strengthen state regulatory
powers and allow compliance to be
enforced by governors. The state and
local community groups can then
determine their preferred direction
and hold industry accountable.
Changes could be litigated, citing
federal rules. However, the legal
process could take years to complete.
Technological Advancements.
Advancements in solar energy
encouraged by the Solar Investment
Tax Credit of 2006 have helped to
increase the use of solar energy, but
material changes in its use are years
away. Much of the growth in the solar
industry can be attributed directly to
the more than 60 percent reduction in
installation costs that has occurred over
the past 10 years. Growth in solar use
can be seen in new home construction
as well as in existing homes and
industrial retrofitting processes. Still,
solar energy accounts for less than
1 percent of the total power generated
in the United States and its use has
had little effect on the coal industry.
The use of wind energy has grown
from less than 1 percent of total U.S.
power generation in 2007 to 5 percent
in 2016, an increase second only to
the growth in the use of natural gas.
There are currently more than 52,000
utility-scale wind turbines in the U.S.
generating 82,183 MW of capacity.
7
To put that in perspective, in 2007
wind energy generated approximately
16,000 MW of power, enough to
power the equivalent of 4. 6 million
homes. As of 2016 the equivalent of
24 million homes are powered by
wind energy. Advancements in wind
energy include offshore installations,
By far the greatest advancement in
energy technologies that had the largest
impact on coal occurred in the natural
gas sector. Over the past 10 years,
technological advancement has allowed
the industry to harvest natural gas from
shale rock and other unconventional
formations. Liquefied natural gas has
made transportation more efficient and
less costly. Natural gas fuel cells, which
capture CO2 normally expelled into
the air, are expanding opportunities.
Advancements in CO2 sand fracturing
reduces ground wastes and disposal
costs, and hydraulic fracturing with
recycled injection materials eliminates
waste and keeps wells more porous
for more efficient production. The
technology advancements have
allowed the U.S. to expand potential
fossil fuel proven reserves to last in
excess of 90 years, based on current
consumption.
8 Continual technological
advances in the production and use
of natural gas will have a material
effect on the coal industry.
Conclusions
The decline of the coal industry will
continue indefinitely despite the new
president’s campaign promises to the
industry. Changes to EPA regulatory
rules and standards might slow the
decline slightly, but the greatest
threat to the industry comes from
the expansion of the natural gas
industry. Natural gas technological
advancements, operating efficiencies,
high reserve pools, low current fuel
costs, and lower CO2 emissions
will continue to erode coal’s market
share of power generation, despite
abundant available coal reserves.
Though they might have been
the catalyst that advanced coal’s
decline, many factors would have
eventually factored negatively into
the coal industry’s future, with or
without Obama and the EPA. Adverse
conditions will continue to cause
disruption to coal mining and in
service and transportation sectors
associated with the industry, resulting
in more restructuring needs over the
next few years. Mining operations
will have to evaluate longer-term
potential changes in the Clean
Power Act as the EPA moves forward
under the new administration.
Rolling back EPA rules and standards
will take many months or years
to finalize, and therefore radical
industry changes are unlikely.
What is more immediate and at risk
in the coal industry are pensions
and union benefits, issues that
must be resolved well before EPA
changes make any improvements
in the outlook for the industry. J
1 U. S. Energy Information Administration (EIA)
2 U. S. EIA
3 Henry Hub Gas Spot Price 2017
4 U. S. EIA
5 U.S. EIA
6 The eRulemaking Management Office (PMO)
7 American Wind Energy Association
8 U.S. EIA
Mark J. Welch, CTP, is a partner at MorrisAnderson
and was named a 2011 “Person to Watch” by
The Deal. He is a senior financial executive and
management consultant who has led numerous
turnaround, crisis management, and recovery
and bankruptcy assignments. In addition
to being a CTP, Welch is an active CPA.
