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US coal executives not expecting reversal in prospects to come from White House

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US coal executives not expecting reversal in prospects to come from White House

SNL Image

A train loaded with coal in the Western U.S. passes a wind turbine. The country is undergoing a rapid transition away from coal-fired power generation.
Source: Alan J. Nash

As the United States awaits the results of the U.S. presidential election, much of the U.S. coal sector is expecting the impact to be more a question of pace than a change in direction.

Analysts have asked several coal executives reporting their companies' earnings results for the third quarter about the impact of the election's potential outcomes. The executives have mostly said the election may have little sway on coal's future prospects as utilities continue to move away from the fuel and some in the sector begin to focus on metallurgical coal and other opportunities.

"A change in the executive branch in Washington is not something that is of a high level of concern to me for our business," Natural Resource Partners LP President and COO Craig Nunez said Nov. 5. "I truly believe that the impact on our business is primarily economic. On the thermal side, it's natural gas prices and it's the fact that for all types of reasons, including regulatory reasons, there just are no new coal-fired power plants being built in the United States."

In a September interview, Ramaco Resources Inc. Executive Chairman Randall Atkins said it is hard to convince U.S. utilities to build new coal plants. That is a challenging position for the sector as a steady pace of coal plant retirements continues under the Trump administration.

"I think that the problem is, no administration is able to flip a switch and either make the coal industry go away or, conversely, flip a switch and make the coal industry magically boom again because ... there are macroeconomic forces that are sort of beyond political control," Atkins said.

Moody's Investors Service wrote in an Oct. 19 note that while the Trump administration has not been able to reverse the decline of coal as promised during the 2016 campaign, a Biden administration could accelerate the fall.

Nunez said the coal sector has already evaluated impacts from a change in administration following plenty of talk about how coal might benefit from a regulatory shift between the Obama administration and the Trump administration.

"When we try and trace that through to the positive impact on our business, it was tough," Nunez said.

On a Nov. 3 earnings call, Hallador Energy Co. said the Indiana thermal coal company producer would "definitely" face a transition away from coal-fired generation regardless of who wins the election. Utilities see growth opportunities in expanding renewable energy capacity, and a change in the White House might only impact the pace of a transition away from coal, the company added.

"If Biden wins, there'll still be a coal industry. And if Trump wins, there'll still be a coal industry," Hallador Energy President and CEO Brent Bilsland said on an earnings call on Election Day.

Alliance Resource Partners LP Chairman, President and CEO Joe Craft said the industry has met with Democratic presidential candidate Joe Biden's energy policy advisers, who have given assurance that they "understand the importance of low-cost energy" and "the importance of coal." Craft, who was a substantial donor and supporter of the Trump campaign, noted that Biden's advisers do look for a transition away from fossil fuels over a 2035 to 2050 time frame.

"I think our future would be better from a coal industry perspective if Trump won, but if he doesn't, Biden in his closing remarks at the debate said he was the president for all the people," Craft said.

One of the most ardent supporters of policy favorable to the coal industry and a supporter of the Trump administration's efforts on that front, Robert Murray, died in late October.

U.S. coal companies are shifting away from relying on power customers who increasingly need less coal. Arch Resources Inc. and Contura Energy Inc. made a pivot to a stronger focus on steelmaking coal a major part of their business strategy in recent months.

Nunez said NRP, a diversified natural resources company that owns interests in coal, aggregates and industrial minerals, is pursuing opportunities unrelated to coal production. That includes the use of "tens of millions of acres of subsurface pore space" for use in sequestering carbon dioxide.

"These are all, at the moment, they're dreams, but they're activities that we have been pursuing for some time," Nunez said. "Our hope is that as thermal coal goes away due to the secular downturn in thermal coal, that we will actually be transforming our business into — I know it sounds strange to be a big coal owner to talk about — becoming green."