BUSINESS

Some Benevolent Green Billionaire Should Buy The Whole U.S. Coal Industry Right Now

The industry's value has dropped two-thirds in just five years.
Arch Coal, the St. Louis-based holder of the second-largest reserve of coal in the U.S., filed for creditor protection Monday
Arch Coal, the St. Louis-based holder of the second-largest reserve of coal in the U.S., filed for creditor protection Monday, with an agreement to erase $4.5 billion in debt.

The U.S. coal industry is in terrible shape.

Peabody Energy, the world’s largest private coal company, filed for bankruptcy on Wednesday. Fellow coal giants Alpha Natural Resources, Arch Coal, Patriot Coal and Walter Energy have each filed for bankruptcy since January 2015. More than three dozen smaller coal companies have gone under in the last four years.

And the coal companies that aren't bankrupt are worth a fraction of what they used to be. Thanks to falling demand from China, a natural gas boom in the U.S. and a string of debt-fueled mergers, the total value of the U.S. coal industry has fallen by two-thirds in the last five years, from just over $60 billion to $22 billion. Including money coal companies have pledged to restore damaged land brings the total to just under $25 billion. 

As a result, one of the most audacious environmental ideas out there is getting cheaper and cheaper to pull off.

"The idea is simple," Robinson Meyer wrote last year in the Atlantic: buy up the U.S. coal industry, retrain the workers and shut it down.

Matt Frost, a former coal company employee who is now a federal contractor who does work for the Environmental Protection Agency, has been promoting this idea in the U.S. Two green business proponents, Gil Friend and Felix Kramer, pushed the idea two years ago.

Back then, Friend and Kramer put the price tag at around $50 billion, which given the industry's current value looks like a wonderfully quaint overestimation in hindsight. In contrast, the cost of burning coal each year in the U.S. is estimated at $345 billion. Buying up the coal mining industry wouldn't stop the country from burning coal, but it would help ensure that some of those massive health costs are taken into account by making coal more expensive.

Who writes the check? A billionaire environmentalist. And it just so happens that billionaire environmentalists have a knack for having finance and deal-making backgrounds. “Savvy climate hawks like Michael Bloomberg, Richard Branson, John Doerr, Jeremy Grantham, and Tom Steyer know all about buyouts,” Friend and Kramer wrote.

Bloomberg's net worth is estimated at $37 billion, and he's already spent $60 million on a campaign to shutter coal-fired power plants. Branson is worth about $5 billion. John Doerr, a prominent venture capitalist, is worth about $4 billion. Jeremy Grantham, who founded asset manager GMO, is a longtime donor to a variety of environmental causes and has said he believes fossil fuels assets will fall in value dramatically. Tom Steyer founded the hedge fund Farallon Capital Management and is worth about $1.6 billion. He spent $76 million to make climate change a key issue in the 2014 elections.

A key part of the idea is to utilize the valuable engineering and geology skills of people in the coal industry. “If we really want to make coal less desirable”— and Paul Krugman and The Economist agree that we should indeed want that — “you have to make it more expensive,” Matt Frost told the Huffington Post last year.

Billions would have to be spent to find new jobs for the miners who showed up for generations to dangerous, dirty jobs and were forced to fight -- too often literally -- for fair pay and basic safety rules. “You could create a whole new sector of un-mining professionals, people who are really good at helping you keep carbon underground,” Frost said.

The next chapter in the U.S. coal mining industry promises to be financially bleak -- but that doesn't mean it has to inflict more harm on coal communities, people's health or the environment. 

CONVERSATIONS