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Labor issues persist in US coal as DOE denies reports it will save ailing plants

Complicated labor issues persist for some U.S. coal companies, while the U.S. Department of Energy denied reports this week that it is considering using its emergency authority to keep financially ailing coal, nuclear or other power plants online.

Coal jobs fell significantly in recent years, though the numbers rebounded a bit in late 2016 and have remained relatively steady since then. When the prospects for metallurgical coal improved, some executives reported highly skilled labor was difficult to find.

"A number of employees between 2010 and today that had transferable skills left the coalfields to take jobs elsewhere," Blackhawk Mining LLC CFO Jesse Parrish told S&P Global Market Intelligence in an interview. "Another group of underground miners basically retired without replacements coming in. Finally, you've had a portion of the workforce that has basically dropped out and is no longer participating."

The most recent data shows that coal production and jobs both took a dip in the last quarter of 2017.

Coal volumes from the Powder River Basin are expected to further decline in 2018, as top coal producers Cloud Peak Energy Inc., Arch Coal Inc. and Peabody Energy Corp. issued guidance that collectively would equal a 1% to 6% drop in production.

"[W]e aren't aware of any [Powder River Basin] producer that is actually hiking production in 2018, and why would they given weak customer demand and challenged economics. In fact, we wouldn't be surprised if other miners cut their production as well," Seaport Global Securities LLC analyst Mark Levin wrote in a Feb. 19 note compiling the guidance ranges of Powder River Basin producers.

While Peabody believes that its operations are some of the best-positioned to compete with low-cost natural gas, it said in a presentation outlining its 2018 priorities that it will "likely avoid significant greenfield development" within the United States, as Powder River Basin mines face the prospect of a "state of terminal decline," according to Steve Piper, director of energy research for S&P Global Market Intelligence.

The declines come amid industry challenges including weak domestic demand, cheap natural gas and the ongoing retirement of an aging coal fleet, which has been one of the key priorities of the Department of Energy.

A department official pushed back this week on recent press reports that the agency might use its Federal Power Act Section 202(c) authority to spur emergency funding to keep coal-fired power plants alive, after the Federal Energy Regulatory Commission rejected a grid resiliency proposal.

"We would never use a 202 to stave an economic issue. ... It's not designed for that," said Bruce Walker, assistant secretary of the Office of Electricity Delivery.

Although some coal producers lobbied for the resiliency proposal, overall spending on coal lobbying fell to $8.8 million in 2017, from $9.1 million in 2016. Matt Grossmann, director of the Institute for Public Policy and Social Research at Michigan State University, said the decline could be explained by the industry's focus on the Trump White House rather than Congress.

Carbon capture and storage, another legislative priority for some producers, received a boost this week when the DOE announced $17.6 million in funding for six projects addressing some of the operational challenges associated with commercially available technologies.

A West Virginia coal miner died Feb. 21 while performing electrical work on a highwall miner at the Pocahontas Coal Co.'s Devils Fork 2 mine in Raleigh County. The incident was the second U.S. coal mining fatality reported this year.

The week also saw Ramaco Resources Inc. report total revenue of $24 million on sales of 265,000 tons of coal for the final quarter of 2017, in a preliminary earnings report released Feb. 22.

Upcoming events:

American Coal Council: ACC will hold its 2018 Spring Coal Forum March 6-8 at Sandpearl Resort & Spa, Clearwater Beach, Fla.

Waterways Council Inc.: WCI will hold its annual press briefing at 9:30 a.m. Feb. 27 at the National Press Club in Washington, D.C.

U.S. Department of the Interior: The Royalty Policy Committee will hold its second meeting Feb. 28 in Houston.