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EPA head Pruitt steps down; thermal miner sees market opportunity

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EPA head Pruitt steps down; thermal miner sees market opportunity

Scott Pruitt stepped down as administrator of the U.S. Environmental Protection Agency effective July 6 amid several investigations into his activities while heading the agency. President Donald Trump said via Twitter that Deputy Administrator Andrew Wheeler will assume duties as acting administrator July 9. Wheeler is a former coal lobbyist who is widely expected to advance the administration's broad goals and continue rolling back environmental regulations.

In his resignation letter to Trump, which was released online by several news organizations, Pruitt noted that he found it difficult to resign from his post was because of the "transformative work" that is occurring. This has included a long list of deregulatory actions that he initiated but leaves unfinished, including the revocation and rewrite of the Clean Power Plan and a repeal and rewrite of the Clean Water Rule.

For his part, Wheeler has vowed to recuse himself from policy issues involving the Energy Star energy efficiency program co-managed by the EPA and the U.S. Department of Energy and will recuse himself from issues involving former clients, including some energy companies. Trump did not indicate whether he intends to nominate Wheeler for the top position. But no matter how long Wheeler remains at the helm, Democratic lawmakers and environmental advocates have said they worry he could accomplish a fair amount.

This week, Paringa Resources Ltd. interim CEO Todd Hannigan offered a bullish outlook for the coal sector. Paringa is overseeing the development of a new thermal coal mine in the U.S. and Hannigan commented that the mine will benefit from very good timing, citing improving international markets, falling utility stockpiles and other favorable indicators.

Offering guidance for the sector's longevity, Seaport Global Securities analyst Mark Levin noted that several large, publicly traded coal companies boast high free cash flow and little to no debt but still struggle to attract investors, and called for more mergers and acquisitions in the space. Attracting new investors to coal equities is challenging even though most publicly traded coal miners are in the "best financial shape they've been in a very long time" amid a healthy international pricing environment, Levin wrote. Most coal companies have said they are focused on returning cash to shareholders, but Levin said he expects reserve and production replacement to eventually become a priority again. Coal companies should take advantage of the strong pricing environment to consolidate before a lack of new incremental investors becomes a bigger problem, Levin wrote.

While this summer's warm weather has been helpful in terms of boosting coal demand, cooler temperatures and a potentially colder winter could erase any progress for the industry, according to industry experts. This year saw the hottest May on record in the U.S. and June was among the five hottest since 1960, said Todd Crawford, chief meteorologist at The Weather Co., providing a catalyst for reducing stockpiles at generating facilities. However, with the heat wave currently gripping parts of the U.S. expected to ease soon, that trend could be offset in the months ahead.

Meanwhile, tariffs that came into effect on roughly $34 billion worth of Chinese goods July 6 mainly targeted components of consumer products, like electrical equipment, chemicals, and metals, while China took aim at agricultural and energy products to the same value when it immediately retaliated. In its proposed list of additional tariffs, the U.S. will again target industrial supply chains, with machinery and electric products topping the list. China's second-round list of tariffs will target energy products, with China accounting for 16% of combined U.S. exports of crude oil and petroleum products. The inclusion of metallurgical coal is noteworthy, since coal was reportedly in considerations as a path to reducing the U.S. trade deficit.

Upcoming events:

American Coal Council: The council will host a webinar July 25 at 2 p.m. E.T.

The council will also host the Coal Market Strategies Conference Aug. 6-8 at the Hyatt Tamaya Resort in Santa Ana Pueblo, N.M.