Coal is down but not out thanks in part to a pro-coal rider passed in the omnibus spending bill [pdf]. Are we looking at pro-export policy or just a little mutual back-scratching?
Kentucky Is Coal Country
The Bluegrass State's coal industry has been singing the blues of late, but they've been handed a small victory courtesy of Representative Hal Rogers (R-KY), who, surprise, surprise, has the coal industry to thank for filling his election coffers.
When it comes King Coal in the United States, Wyoming and West Virginia are at the top, responsible for 39 and 12 percent of total coal production, respectively. But at nine percent, Kentucky is right behind.
And it's not just about production. In 2012, a whopping 92 percent of Kentucky's net electricity generation came from coal-fired power plants.*
Little surprise, then, that the majority of Kentucky's congressional delegation is staunchly pro-coal (see here and here) -- some might even say that the coal industry has them in its back pocket hoping to find a bit of largess in the form of spare change. And that is where our tale begins.
King Coal Teetering on Its Throne?
As has been documented in TheGreenGrok, King Coal's seat on the throne of the U.S. energy kingdom has been a bit wobbly of late. U.S. coal production has been declining; in Kentucky production over the first three quarters of 2013 was down by 13 percent [pdf] relative to 2012. While coal consumption increased a bit in 2013, the net trend has been decidedly negative since 2011 [pdf]. And then there are the jobs -- mines in 2012 employed fewer workers than in 2011, and Kentucky lost more mining jobs than any other state -- shedding 2,283 employees [pdf] .
Many of those who would like to see coal maintain its kingly position blame Obama and his so-called "war on coal" for this turn of events. While it’s certainly true that his administration's promulgation of standards on mercury emissions is not helping the coal industry -- and the proposed regulations on carbon dioxide emissions from new power plants won't cause coal's profits to rise either -- most experts agree that the real reason for King Coal's fall is economic: the unexpected glut of natural gas from fracking has lowered its price making it competitive with coal.
And, to be fair, it should be pointed out that if the regulations being promulgated by the Obama administration are a war on something, that something is more accurately characterized as pollution, not coal.
Unfortunately for the king, coal happens to be the dirtiest of the fossil fuels, and is almost by necessity going to be placed at a disadvantage when the environment and people's health are priorities. Given the stalemate in Congress, Obama's only recourse to protect the environment, save lives, and slow climate change is to promulgate the regulations that the coal industry finds anathema. As they say: "It ain't personal."
TVA Insult
A sign of coal's decline can be seen in what's been going on at the Tennessee Valley Authority (TVA).
Time was, four out of every five watts of electricity generated by TVA came from burning coal. Today it's less than half.
And in November, to add insult to injury, TVA announced it was shuttering eight plants, six in Alabama and two in Kentucky -- much to the chagrin of the Kentucky congressional delegation, including Sen. Mitch McConnell (R-KY), who wrote a note of protest [pdf] warning of job losses.
But TVA President Bill Johnson wouldn't budge, explaining his decision like so: "our objective is to make the best decision for the entire region, and that's what we did."
Foreign Trade to the Rescue
But it hasn't been all bad news for coal; while U.S. production and consumption have slipped, U.S. exports are on the rise. And quite spectacularly so: between 2009 and 2012, exports doubled.** Part of that increase reflects growing markets for mostly metallurgical coal in China, South Korea, and India, but by far the largest share is shipped to Europe.
Obama Enters Foreign Fray
In January 2010, Obama committed the United States to cut its greenhouse gas emissions by 17 percent relative to 2005 by 2020 in the Copenhagen Accord. And it's a bit surprising but we're not all that far off from meeting that goal despite the lack of any significant national climate legislation. Unfortunately the same cannot be said of global emissions. And the United States may be reversing its trend too -- emissions ticked upward in 2013.
Last October the Treasury Department issued new guidelines that seemed to reflect a concern about growing greenhouse gas emissions from other countries. These guidelines will limit U.S. bankrolling of the building of new coal-fired power plants abroad. Projects in all but the poorest countries must use carbon capture and storage to get U.S. funding under these guidelines -- that is, they must meet the same greenhouse gas emissions standards that apply to domestic plants.
I suspect the new guidelines were motivated by two concerns:
- Consistency: Does it make sense to pat ourselves on the back for our smaller carbon footprint while financing other countries to expand theirs by building dirty power plants?
- Leveling the economic playing field: By financing dirty power plants in other countries while not permitting them here, are we not just shooting ourselves in the economic foot, helping foreign companies to operate without the expense of using low-carbon energy but requiring our companies to do so?
If you answer no to the first question and yes to the second, these new guidelines should seem sensible.
But Not to Representative Rogers
Rogers was most definitely not happy. Noting that "coal exports are just about the only bright light in the coal business these days,” he predicted that the new guidelines "obviously would curtail a lot of coal exports." That may be obvious to Rogers, but to me, that seems a bit of a stretch. For one, just because the United States doesn't finance a new power plant doesn't mean the plant, when it is operational, won't buy its coal from the United States. Secondly, most U.S. coal exports are metallurgical and are not used in power plants anyway.
Still, Rogers decided, true to his cause, to do something about those nasty export-killing guidelines. That something turned out to be placing a rider on the congressional omnibus spending bill [pdf], the tried and true method for legislators to get their special interest legislation through Congress under the radar. (See here, here and here.) The bill passed on January 16, and as TheHill.com reports:
"Rogers made sure the bill contains several crucial pro-coal riders that help out one of Kentucky's primary industries. The bill stops administration plans to curtail Export-Import Bank and Overseas Private Investment Corporation financial help for coal plants overseas."
So, chalk one up for King Coal, no doubt Rogers' rider will mean a considerable chunk of extra change in coal's coffers. But you can also chalk one up for Rogers and his coffers. Coal interests have given him quite a bit of money over the years, and Rogers' latest exploit should keep the contributions flowing.
And that, my friends, is how the game is played.
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End Notes
* Six of Kentucky's coal-fired power plants are included in the top 100 most polluting power plants [pdf] in the United States.
** While final numbers are not yet in, it appears that exports in 2013 will be a bit down relative to 2012.
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